Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Coventry Corporation Bill,

Read the Third time, and passed.

Merthyr Tydfil Corporation Bill [Lords],

Read the Third time, and passed, with Amendments.

Newquay and District Water Bill,

As amended, considered.

Motion made, "That Standing Orders 240 and 262 be suspended, and that the Bill be now read the Third time."—[The Deputy-Chairman.]—(King's Consent signified.)

Question put, and agreed to.

Bill accordingly read the Third time, and passed.

EXPERIMENTS ON LIVING ANIMALS.

Motion made, and Question proposed,
That an Address be presented for a Return of Licences granted under the Act 39 &amp; 40 Vic. cap. 77, showing the number of experiments performed under the Act during 1938, and the registered places at which such experiments may be performed (in continuance of Parliamentary Paper No. 149 of 1938).— [Mr. Peake]

Mr. Leach: On a point of Order. I wish to know, Mr. Speaker, whether it is within the competence of any private Member who seeks to enlarge the purposes of this Order, to do so at this juncture?

Mr. Speaker: No, I do not think that would be so. The hon. Member has no power to require the Amendment of a Return presented by the Government.

Mr. Leach: Then I object to this Order.

Mr. Speaker: It is very unusual for an hon. Member to object to an Order of this kind at this stage. After all it is withholding from the House something which they are entitled to have.

Mr. Leach: Objection was taken to an Order on similar lines recently, and in that case the Order for the time being was withdrawn. There was a request that it should be suspended by the Minister, and he amended it later on, for some mysterious reason and in some way or other, presumably to placate the hon. Member for South Croydon (Sir H. Williams), who took objection to it. I thought that perhaps I might have the right to do to-day what the hon. Member for South Croydon did then.

Mr. Speaker: I would advise the hon. Member not to follow bad examples.

Question put, and agreed to.

Oral Answers to Questions — ABYSSINIA.

Mr. Ammon: asked the Prime Minister what steps are being taken to prevent the recruitment of natives of the British Sudan by the Italian authorities for use as troops in Abyssinia?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): As I stated in my reply to the hon. and learned Member for Kingswinford (Mr. A. Henderson) on 21st June, my Noble Friend had no reason to believe that any natives living in the Anglo-Egyptian Sudan had been recruited for the Army in Italian East Africa. It has not, therefore, been necessary to take any steps to prevent such recruitment.

Mr. Ammon: Has the right hon. Gentleman received any further information since he gave that answer; and if not, will he look into such evidence as I have, if I bring it to him?

Mr. Butler: Certainly, I will examine any evidence that the hon. Member sends to me.

Miss Rathbone: Does the right hon. Gentleman's reply refer also to natives who are normally resident in the British Sudan but who have gone for grazing purposes within Italian territory?

Mr. Butler: My information is in regard to those natives who are ordinarily resident in the Anglo-Egyptian Sudan.

Oral Answers to Questions — FAR EAST (SITUATION).

Mr. Mander: asked the Prime Minister whether he will consider the advisability of proposing the immediate summoning of a special meeting of the Council of the League of Nations under Article 11 of the Covenant, in connection with Japanese aggression in the neighbourhood of Tientsin, in view of the international interests involved, the preservation of law and order, and the maintenance of treaty rights?

Mr. Arthur Henderson: asked the Prime Minister whether he has any further statement to make on the situation in the Far East?

Major-General Sir Alfred Knox: asked the Prime Minister whether he will now demand from the Japanese Government the cancelling of the blockade at Tientsin and an apology for the insults offered to our nationals during the past three weeks?

Captain Sir Derrick Gunston: asked the Prime Minister (1) whether he will give the House any information in regard to the food supplies in the British Concession at Tientsin;
(2) what report he has received of British women subjects being stopped and searched by Japanese outside the British Concession at Tientsin?

Mr. Mander: asked the Prime Minister the number of British subjects who have been stripped and searched or otherwise molested at Tientsin during the last month; the number of protests made or other action taken; and what satisfaction has been obtained?

The Prime Minister (Mr. Chamberlain): I will first deal with the local situation at Tientsin. Arrivals of perishable foodstuffs continue to be spasmodic, only a fraction of the normal reaching the British Concession. The local British authorities are taking active steps to remedy the present deficiency. All British subjects who passed through the barriers since the commencement of the blockade have been subjected to a rigorous search, as I stated in the House on 19th June. The number of instances in which British subjects have been compelled to strip is 15, including one woman, but there do not appear to have been any more such cases during the last day or two.
His Majesty's Ambassador in Tokyo has been for some time in communication with the Japanese Goverment on the position and I am now able to announce that, as a result of an exchange of views which has taken place between His Majesty's Government in the United Kingdom and the Japanese Government, it has been agreed that conversations shall take place in Tokyo in order to effect a settlement of the various questions relating to present conditions in Tientsin, and that representatives of the local British and Japanese authorities will be invited to Tokyo for the purpose. These conversations which are expected to start forthwith, will relate to the local issues and will be designed to secure that while the neutrality of the Concession shall be maintained, British authority in the Concession shall be preserved intact. In view of these conversations, His Majesty's Government assume that there will be an end of stripping, searching and similar incidents in Tientsin, and they have reason to hope that this will in fact be the case. In the circumstances, His Majesty's Government are not disposed to consider the advisability of referring the dispute to the Council of the League of Nations.
In regard to South China, the Japanese authorities announced military operations for 27th June against the Treaty ports of Wenchow and Foochow. A request was received from the Japanese Consul-General at Shanghai that all third Power vessels, including warships, should leave these ports by noon on 29th June. His Majesty's Consul-Genera] at Shanghai replied pointing out that the right of British vessels to proceed to any port in China remains unaffected, and we consider that the Japanese authorities are consequently not entitled to exercise undue interference with the movements of British ships or avoidably to endanger British lives or property. The situation as regards visits of British merchant shipping to Swatow is still obscure, and negotiations continue between the local British and Japanese authorities.

Mr. Mander: Can the Prime Minister say whether Dr. Goebbels is correct in saying that Tientsin is to be the Munich of the Far East?

Mr. A. Hendersons: Will the conversations which are now to take place in Tokyo be limited to the local issues which arose recently in Tientsin, or will they


cover the wider demands that have been put forward by various Japanese spokesmen?

The Prime Minister: I have said in my answer that these conversations will relate to the local issue.

Sir A. Knox: Pending the result of the conversations in Tokyo, will the Prime Minister insist that all interference with British subjects at Tientsin shall cease absolutely now; and will he point out that we have exercised a larger patience in the last fortnight than any other great Power in history?

Mr. Noel-Baker: asked the Prime Minister whether His Majesty's Government have yet received any reply from the Japanese Government to their protest concerning the murder of Mr. R. M. Tinkler by Japanese troops at Shanghai?

Mr. Butler: No, Sir. Further instructions have been sent to His Majesty's Ambassador at Tokyo to press for an early reply.

Mr. Noel-Baker: Since this brutal and calculated murder is really only part of the persistent campaign of the Japanese to destroy British influence and trade in China, will the Government consider taking effective measures to deal with the situation, if necessary by stopping Japanese trade in British territories?

Mr. Butler: In this particular case I think we had better wait for the reply to the urgent instructions sent to His Majesty's Ambassador.

Mr. Noel-Baker: Have the Government pressed on the Government in Tokyo that this was a brutal murder, done in cold blood, and that the man was refused medical attention for 15 hours after having been bayoneted thrice, as a result of which he died?

Mr. Butler: All the facts of this deplorable case have been presented in the Note to the Government of Japan.

Oral Answers to Questions — GREAT BRITAIN AND PORTUGAL.

Mr. Day: asked the Prime Minister particulars of what conclusion has now been arrived at as a result of the military mission which recently visited Portugal

for the purpose of considering adequate arrangements for the defences of British and Portuguese colonies?

Mr. Butler: I would refer the hon. Member to the reply given to the hon. Member for Wolverhampton, East (Mr. Mander) on 1st February, to which, for the reasons given, I have nothing to add.

Mr. Day: Are we to understand that all outstanding questions have been more or less settled?

Mr. Butler: Yes, Sir, most of them.

Oral Answers to Questions — ANGLO-FRENCH-RUSSIAN CONVERSATIONS.

Mr. A. Henderson: asked the Prime Minister whether he has any statement to make on the Anglo-Russian negotiations?

The Prime Minister: I am not yet in a position to add anything to my statement on 26th June.

Mr. Henderson: Has the right hon. Gentleman seen a Press statement to the effect that further instructions have been sent to our representatives at Moscow?

The Prime Minister: Yes, Sir.

Lieut.-Commander Fletcher: Are the heads of the Baltic States being kept fully informed of the course of these negotiations, and is His Majesty's Government keeping in close touch with them?

The Prime Minister: We are in touch with the French Government, but I cannot say that we are in touch with the heads of the Baltic States.

Lieut.-Commander Fletcher: Is it not very important that the heads of the Baltic States should be kept fully informed of what is being done?

Oral Answers to Questions — GERMANY (ANTI-BRITISH PROPAGANDA).

Mr. A. Henderson: asked the Prime Minister whether, with a view to maintaining friendly relations with the German people, His Majesty's Government will draw the attention of the German Government to the derogatory attacks on this country, recently made in speeches by the German Minister of Propaganda?

The Prime Minister: I have noticed, particularly in the German Press articles, distorting and sneering at any speeches made by British statesmen which seek to show an understanding of Germany's position. I cannot but deplore such attempts to poison the relations between our two countries, but I do not propose to make representations to the German Government on the subject.

Oral Answers to Questions — PASSPORTS.

Miss Rathbone: asked the Prime Minister whether he is aware that refusals by the passport officer to accept applications for passports made on behalf of minor children by the mother have caused great inconvenience in cases where the parents are separated or where the father is mentally incapacitated or away from home or otherwise prevented from giving his signature; what is the present wording of the instructions given to passport officers for dealing with such cases; and whether he will consider meeting the difficulty by amending the instructions?

Mr. Butler: The instructions provide that, where passport facilities are required for a person under the age of 21 years, the written consent of the father or other legal guardian should be furnished. No instances have been brought to the notice of my Noble Friend of serious inconvenience having been caused by the operation of this requirement. If in any case there are difficulties in the way of obtaining the father's consent and the circumstances are explained to the Passport Office, the matter can always be arranged and no amendment of the instructions seems to be called for.

Miss Rathbone: Is the right hon. Gentleman aware that in a recent case the passport officer refused to listen to representations that it was impossible to obtain the father's signature; and could not the regulations be amended so as to cover cases where it is obvious that the father's signature cannot reasonably be obtained?

Mr. Butler: If the hon. Member will bring any particular case to my attention, I will see what can be done about it.

Oral Answers to Questions — DANZIG.

Mr. Cocks: asked the Prime Minister whether he has airy information concerning the position in Danzig; and whether the formation of a Nazi Free Corps in that city is in accordance with the inter national agreements regulating its constitution?

Mr. Butler: The third annual District Cultural Week of the National-Socialist Party was held at Danzig from13th-18th June. This provided an opportunity for the German Minister of Propaganda to visit the Free City and to deliver a speech on 17th June on the international position of Danzig. In reply to the second part of the question, certain reports have been brought to the notice of His Majesty's Government, but the position is not at the moment quite clear.

Mr. Cocks: In view of the somewhat delicate position at Danzig, will not the Government consider easing the position by sending a British naval squadron on a friendly visit to the Baltic?

Oral Answers to Questions — GREAT BRITAIN AND POLAND.

Mr. Tree: asked the Prime Minister whether he can give any information as to how the financial negotiations with the Polish Government are proceeding?

The Prime Minister: Discussions are still continuing, and I regret that it is not yet possible to make any statement.

Oral Answers to Questions — ROYAL AIR FORCE.

CIVILIAN BAKERS, CRANWELL (WAGES).

Mr. Banfield: asked the Secretary of State for Air whether he is aware that civilian bakers employed at Cranwell aerodrome are in receipt of wages of 55s. per week of five 10-hour shifts, including night work alternate weeks; and, in view of the fact that these rates are extremely low, whether he will authorise an immediate increase on the lines of the rates paid at Halton Camp?

The Secretary of State for Air (Sir Kingsley Wood): The rate of wages paid to civilian bakers employed at Cranwell is 55s. for a 48-hour week. This rate will be reviewed if and when the recent proposals of the Bakery Trade Board are brought into effect.

Mr. Banfield: Will the right hon. Gentleman please bear in mind that the rates fixed by a trade board to be paid are the rates to be paid by the worst employers in the country, and will he therefore really do something to bring his Department into line with the best employers?

Sir K. Wood: I understand that this and other cases of industrial wages are regulated on fair wage principles on the basis of the rates paid in the district for comparable labour.

Mr. Banfield: May I press the right hon. Gentleman to realise that these men who receive low wages are on night work every alternate week, and surely he will know himself that these wages do not compare with trade union rates even in those parts?

Sir K. Wood: Any information that the hon. Member likes to send me, I will gladly consider, or I will see him, if he wishes.

Mr. Mathers: Is not the right hon. Gentleman aware that the developments that take place under his Department make a change in the locality and entitle the rates to be raised in many cases?

Sir K. Wood: I do not know that, but if the hon. Member has any information that he would like me to see, I will gladly consider it.

FOOD SUPPLY.

Mr. Sexton: asked the Secretary of State for Air the value and weight of National Mark beef supplied to the Royal Air Force for the years 1936, 1937 and 1938, respectively?

Sir K. Wood: I would refer the hon. Member to the reply given yesterday by my right hon. Friend the Secretary of State for War. These figures cover the Royal Air Force, the supplies for which are obtained by the Army authorities.

Mr. Sexton: Is the right hon. Gentleman aware, first, that I have received no real answer to my question about National Mark beef and, secondly, that the Ministry of Agriculture has been decrying the demand for cheap food and that the Government are the biggest sinners, because during the past three years they have paid only 2½d. per lb. for meat?

PAY (DEDUCTIONS).

Mr. Parker: asked the Secretary of State for Air whether he is aware that many men joined the Royal Air Force under the impression that they would receive the full pay with all necessaries found; that much discontent has been caused by the large number of compulsory weekly deductions made in a number of units and amounting, in one case, to as much as 5s. 9d., out of an armourer's 12s. weekly pay; and whether he will make arrangements for all necessities to be provided free by the service?

Sir K. Wood: All clothing and necessaries are supplied free to men joining the Royal Air Force. To meet the cost of necessary replacements and repair of clothing and necessaries and also of laundry and other miscellaneous items of this kind each airman receives a quarterly cash allowance. Payment for these items is made by way of weekly deductions. I am unable to trace that deductions have been made to the extent indicated by the hon. Member. In a typical case over a period of just over 10 weeks these deductions amounted to 1s. 7d. a week from a gross pay entitlement of 14s.; but if the hon. Member will give me particulars of any cases, I shall be glad to have them looked into.

Mr. Parker: Is the right hon. Gentleman aware that in this particular case 1s. 6d. was deducted towards the cost of purchasing football equipment, and that there were deductions for soap and for polish for buttons?

Sir K. Wood: Perhaps the hon. Gentleman will let me have those facts, and I will look into them.

Captain Cazalet: Will my right hon. Friend consider giving instructions to recruiting officers to explain to recruits that for a certain number of weeks when they first join there will be deductions, so as to obviate misunderstandings?

Sir K. Wood: It should also be explained to them that they receive quarterly cash allowances.

AIRCRAFT FACTORY, SPEKE (EMPLOYÉS, MILITARY TRAINING).

Mr. Kirby: asked the Secretary of State for Air whether employés in the Government's aircraft factory at Speke, Liverpool, when attending camps as


Territorials, or when undergoing their six months' training as militiamen, will have their service pay and allowances augmented to equal the wages received while at work in the factory?

Sir K. Wood: I understand that the position in regard to the employés at the factory at Speke, managed by Messrs. Rootes, Limited, is that weekly paid staff who are Territorials and who, under the terms of their engagement with the firm, are entitled to a fortnight's holiday with pay, receive full pay while attending camp and are given an extra week's holiday. Hourly paid staff, who are not entitled to a holiday under the terms of their engagement, are credited with an allowance while at camp which is at the rate of £1 per week for married men and 15s. per week for single men. Men called up for service with the Militia will not receive any payment from the firm during the period of their military training.

Mr. Kirby: Will that reply be applicable to all departments of this character run by the Ministry and the Government generally?

Sir K. Wood: I will inquire into that, but this matter has to do with a particular firm, and if the hon. Member will put down a question, I will try to give him a reply.

CONTRACTS (AIRDRIE)

Mr. Anstruther-Gray: asked the Secretary of State for Air whether it is proposed to place any further orders in Airdrie?

Sir K. Wood: Yes, Sir. A further substantial sub-contract order has just been placed in Airdrie by one of the principal aircraft constructors.

Mr. Henderson Stewart: Will my right hon. Friend consider issuing a statement showing in some detail what part Scotland as a whole plays in meeting the armament requirements of the Ministry?

Sir K. Wood: I recently made a full statement on the matter, and I have received various deputations. I think my hon. Friend will agree that Scotland has received very favourable consideration.

AERODROME SITES.

Major Stourton: asked the Secretary of State for Air whether it is intended to proceed with the erection of an aerodrome

on the Stourhead estate at Stourton, Wiltshire, in view of the fact that such action would not only involve the withdrawal of the offer by Sir Henry Hoare, of Stourhead House, of 2,700 acres of land to the National Trust, but discourage future offers of a similar character?

Sir K. Wood: It is, I think, within the knowledge of the House that a large number of sites for aerodromes still remain to be found to meet urgent defence requirements in connection with the Royal Air Force expansion scheme, and that it is increasingly difficult to find sites which fulfil the various strategical and technical requirements. Such a site was found near Stourhead, and a very thorough survey has so far failed to reveal any other suitable site in the neighbourhood. Nevertheless, in view of the nature of the generous offer by the owner of the Stourhead estate to bequeath the property to the National Trust, I have decided not to proceed with the acquisition of this site.

Major Stourton: Is my right hon. Friend aware that this decision will be widely appreciated, especially in the West of England?

Mr. Gallacher: Is the right hon. Gentleman not aware that it is a scandal that the land of this country should be held by or disposed of at the will of any individual?

Mr. Gordon Macdonald: asked the Secretary of State for Air the average cost per acre of the land bought as sites for training aerodromes during the last five years?

Sir K. Wood: The average cost has worked out at £48 per acre, including compensation for tenant right, disturbance, severance, etc.

Mr. Macdonald: asked the Secretary of State for Air whether, when deciding upon sites for training aerodromes, consideration has been given to the many large derelict areas in the mining districts; and whether, as regards future sites, he will give special attention to such areas?

Sir K. Wood: My Department is always prepared to consider such areas as are referred to by the hon. Member, but generally the mining districts do not provide the large flat areas and type of soil required for modern aerodromes.

Mr. Macdonald: Is the Minister satisfied that the cost involved in getting these flat areas is so small that it does not make these other areas worth consideration?

Sir K. Wood: I shall be happy to look into any case which the hon. Member cares to send me.

Mr. T. Smith: Will the Minister look into parts of West Yorkshire?

Sir K. Wood: Yes, Sir; if any hon. Member can give me particulars of any areas where I can find sites for aerodromes which would be suitable for our requirements, I shall be only too glad to receive them.

Mr. Poole: Is the Minister bearing in mind the many aerodromes constructed by local authorities which are completely uneconomic propositions, and will he direct his attention to one which has been constructed by the Walsall Corporation?

Major Mills: asked the Secretary of State for Air whether, with a view both to permitting the best use to be made of agricultural land in the production of foodstuffs and to expediting the choice of suitable sites, he will consult with county councils and their agricultural advisory staffs before acquiring agricultural land for aerodromes and camps?

Sir K. Wood: It is the practice of my Department to consult the Departments of Agriculture before agricultural land is acquired for new aerodromes, but the selection of a suitable site depends upon the fulfilment of technical and strategical requirements and the final responsibility for the acquisition of land for Royal Air Force purposes must, therefore, rest with the Air Ministry. In all the circumstances, it is not considered that further consultations are necessary, but I can assure my hon. and gallant Friend that the representations of authoritative bodies in any particular case are always given due consideration.

APPLICANTS (MEDICAL EXAMINATION).

Mr. G. Macdonald: asked the Secretary of State for Air whether his Department has the same kind of arrangement as the War Office for dealing with applicants who fail to satisfy the medical tests; and, if not, will he consider making such arrangements?

Sir K. Wood: No, Sir, I am glad to say that no difficulty has so far been experienced in meeting the full requirements of the Royal Air Force from candidates of the appropriate medical standard. In these circumstances, no necessity has arisen for the creation of the special arrangements to which the hon. Member refers.

Mr. Macdonald: Is the right hon. Gentleman aware that the Secretary for War yesterday informed the House that over 2,000 recruits were brought from an unfit state to a fit state by this arrangement?

Sir K. Wood: Yes, that may well be, but, so far as the Royal Air Force is concerned, what I have said shows that we have no difficulty in meeting our full requirements from candidates of the appropriate medical standard.

Sir Archibald Sinclair: Are those medical standards approximately the same as those for the Army?

Sir K. Wood: I cannot say, but, as the right hon. Gentleman knows, the standards for the Royal Air Force are high.

AIRCRAFT PRODUCTION.

Mr. Day: asked the Secretary of State for Air whether he can make any statement showing the increase in aircraft production in the British Isles during the previous 12 months; and whether same is at present showing a marked upward trend?

Sir K. Wood: It would not be in the public interest to give figures of actual deliveries. I can, however, state that there is every prospect that the forecast of production which I gave in introducing the Air Estimates on 9th March this year will be fully realised, and that production is showing a continued upward trend.

Mr. Day: Can the Minister say whether Great Britain is now overtaking the gap between this country and the Continent in this matter?

OFFICERS (POLITICAL ACTIVITIES).

Squadron-Leader Hulbert: asked the Secretary of State for Air whether he will arrange that in the event of a General Election taking place during a period when the whole or part of the Auxiliary


and Territorial forces have been called up or embodied, Members of this House who are also members of those forces will be granted exemption from the appropriate King's Regulations and Air Council Instructions which prohibit serving officers from taking part in political campaigns?

Sir K. Wood: I am considering what steps can properly be taken in the matter.

Squadron-Leader Hulbert: asked the Secretary of State for Air what disabilities there are affecting officers and men of the Auxiliary Air Force in regard to speaking in connection with or standing as candidates at parliamentary or municipal elections?

Sir K. Wood: The Regulations provide that when called out for service (other than training) or embodied or when serving with the regular Air Force, officers and men of the Auxiliary Air Force are prohibited from taking an active part in political affairs and from standing for Parliament. They may be candidates at municipal elections with the consent of the Air Council.

ACCIDENT (ACTING-PILOT-OFFICER).

Lieut.-Commander Fletcher: asked the Secretary of State for Air whether he has inquired into the circumstances under which Acting-Pilot-Officer H. W. S. Stanton-Hope was killed on 21st February, at No. 9 Flying Training School, Hullavington?

Sir K. Wood: Yes, Sir. This accident was investigated by a Royal Air Force Court of Inquiry, and I have personally examined the case. It has not been possible to establish a definite cause of this unfortunate accident.

Lieut.-Commander Fletcher: Has any information been brought to the right hon. Gentleman's notice which shows that this officer was ordered up on solo night flying for only the second time in his life at a time when his diary and letters show that he was tired out for want of sleep?

Sir K. Wood: No, Sir. I looked into this matter very carefully, because I had some letters from his father, who was naturally very anxious about the position, and I satisfied myself that there was no justification for that statement. If the hon. and gallant Member would like to consult with me I shall be glad to show

them to him, in order that he may be able to satisfy himself in the matter; but I have looked into it very carefully myself. The instructor who gave half an hour's dual flying before the accident considered him quite competent to carry out the duty.

Lieut.-Commander Fletcher: Why were the diary and the letters which showed the condition of this young officer withheld from the Court of Inquiry?

Sir K. Wood: I could not say whether they were or not. The hon. and gallant Member had better put down that question if he thinks it important for me to answer it. I have looked into the matter very carefully and I am satisfied that there is no justification for such statements.

Lieut.-Commander Fletcher: I beg to give notice that I shall raise this matter on the Adjournment at the earliest possible opportunity.

Oral Answers to Questions — CIVIL AVIATION.

LONDON-PARIS SERVICE.

Mr. Perkins: asked the Secretary of State for Air whether he will make a statement on the failure of Imperial Airways, Limited, to maintain an adequate service between London and Paris and return between 14th June and 22nd June; and whether the situation has yet improved?

The Under-Secretary of State for Air (Captain Harold Balfour): Between the dates mentioned the regular operational schedule of seven services in each direction between London and Paris was operated by Imperial Airways, Limited, except on 20th June, when one flight was cancelled. Some irregularity in actual times compared with the published timetables occurred because on certain days during this period aircraft of the Heracles type had to be used on services in place of Frobishers, temporarily withdrawn for remedy of a minor technical defect. Since 21st June, aircraft of the Ensign and Frobisher types have been operating on this service.

Mr. Perkins: Is my hon. and gallant Friend aware that on 20th June passengers by Imperial Airways from Le Bourget to London were kept waiting at Le Bourget for more than 2½ hours owing to the absence of any Imperia0.l Airways machine, and that during that time they watched the departure of two Air-France


machines for this country? Does he not think that such incidents are having a deplorable effect on the reputation of British aviation?

Captain Balfour: I am not aware of the exact circumstances which the hon. Member has just mentioned. If he will send me particulars of the actual times I will investigate the matter, but the delay was probably attributable to the reasons which I have mentioned in my original reply.

Lieut.-Commander Fletcher: Is it not quicker by train?

ISOLATED PLACES (WARNINGS AND ASSISTANCE).

Mr. Sexton: asked the Secretary of State for Air (1) whether he will consider supplying first-aid supplies and binoculars to isolated moor and hill dwellings on the principal air routes in order to mitigate sufferings of injured aviators, and to enable early location of aircraft which has been forced down;
(2) whether he will consider providing a system of strong light or other warning signals on the higher moorland points on the principal air-routes in order to help in the guidance of aircraft at night time or during fog?

Captain Balfour: Whilst I appreciate the motives which have inspired the hon. Member's questions, I am afraid that the arrangements which he suggests would not prove of practical advantage, and, moreover, would be exceedingly costly to set up and maintain. Under conditions of bad visibility, when accidents are most likely to occur, a system of lights would be ineffective and it would not in any case be possible for pilots to hear sound signals. Under such conditions, a much more effective means of preventing accidents is the development and proper use of wireless apparatus and blind flying instruments.

Oral Answers to Questions — REFUGEES.

Mr. Hannah: asked the Secretary of State for the Colonies whether he is aware that the district known as Negeb was one of the most flourishing provinces of the Byzantine Empire; and whether the Government have any plans for making it available to refugees on such a scale as conditions demand?

The Secretary of State for the Colonies (Mr. Malcolm MacDonald): I understand that there is evidence of settlement in the Negeb during the Byzantine period, but that it would be an exaggeration to describe this region as one of the most flourishing provinces of the Byzantine Empire. The possibility of settling refugees in this area is not excluded, but the borings for water which were recently made yielded almost entirely negative results.

Mr. Hannah: How did the Byzantines get on for water?

Oral Answers to Questions — PALESTINE.

MANDATE COMMISSION'S REPORT.

Mr. Mander: asked the Secretary of State for the Colonies whether he will ask the Mandates Commission to arrange for the publication of the report and evidence of their proceedings on the subject of the Government's policy in Palestine at the earliest moment, in view of the world-wide interest in the question and the uncertainty as to the future that exists?

Mr. M. MacDonald: The arrangements for the preparation of the report of the Permanent Mandates Commission, and for its submission to the Council of the League of Nations, fall within the discretion of the Commission themselves. I have no doubt that they will arrange for publication as early as possible before the September meeting of the Council.

Mr. Mander: Will the right hon. Gentleman be good enough to inquire whether it would not be possible to publish the report in July instead of August, when it generally comes out, so that the House may have an opportunity of considering it before we adjourn?

Mr. MacDonald: The Mandates Commission have not yet finished the consideration of their report, and pending that consideration I think it will be impossible for me to add anything to what I have said.

Mr. Noel-Baker: Will the right hon. Gentleman consider asking the Mandates Commission to publish their report on Palestine as a separate document before they finish all the rest of their work?

Mr. MacDonald: I will keep that matter in mind, but while the Mandates Com-


mission are still considering what their report should be, I think it would be premature to make any suggestion.

Mr. Noel-Baker: If the Commission do terminate their work, would it not be desirable that Parliament should have the report before it rises in August?

SYRIA (CUSTOMS AGREEMENT).

Sir A. Knox: asked the Secretary of State for the Colonies whether a revision of the existing Customs Agreement between Palestine and Syria is now under negotiation; and whether he will, in the interests of the poorer sections of the population of Palestine, avoid any increase in this agreement of the present duties on goods imported from Syria?

Mr. MacDonald: Negotiations are at present in progress for the conclusion of a new Customs Agreement between Palestine and Syria. I am unable at this stage to say whether any increases in existing duties on goods imported from Syria will be made, but the interests of all sections of the population of Palestine are being borne in mind.

Sir A. Knox: Has there not always been free trade between Syria and Palestine, and what is the object of putting on duties?

Mr. MacDonald: I do not think I can say anything more, pending the negotiation of this Customs agreement, but we are bearing that kind of consideration very carefully in mind.

Mr. Crossley: Will my right hon. Friend bear specially in mind the need for a reduction in the duty on cement in Syria, owing to the amount of rebuilding that is going on here?

ARAB CENTRE, LONDON (STATEMENT).

Mr. Maxton: asked the Secretary of State for the Colonies whether he has considered the statement issued by the Arab Centre in London and sent to him detailing 19 cases of brutality against Arabs by the authorities in Palestine and giving the names of those who have suffered; and whether he proposes to take any action to deal with this matter?

Mr. M. MacDonald: I have received a copy of the statement in question, and have referred it to the High Commissioner for Palestine for a report on the details. I should, however, say at once

that I regard this document as a piece of propaganda which contains a mass of falsehoods.

Mr. Maxton: Will the right hon. Gentleman take steps to meet the people who are responsible for issuing this document and find out whether they have any justification for their charges?

Mr. MacDonald: I would like to await the report of the High Commissioner before taking any further steps in the matter. I can assure the hon. Member that I shall then take whatever steps are appropriate.

Mr. McGovern: Will the right hon. Gentleman inquire whether the originator of this document is a Nazi agent in this country?

Mr. Crossley: Is it not a fact that the British Army in Palestine has on the whole, throughout these troubles, behaved with great patience and fortitude?

Mr. MacDonald: That is so, and among other tributes that have been paid to the British soldiers in Palestine have been many very generous tributes from the Arab population themselves.

Mr. Maxton: Is the Minister able to say now, in this House, that the more gross of these charges—the foul and filthy ones—are not true, without inquiring of the High Commissioner?

Mr. MacDonald: I have not any hesitation in saying that this document contains what I have called a mass of falsehoods.

Viscountess Astor: Is it not true that it is being sent to all sorts of people, and is a very dangerous document?

POLICE INSPECTOR'S TRIAL.

Sir Nairne Stewart Sandeman: asked the Secretary of State for the Colonies what was the offence of Police Inspector Goddard, who was on trial in Palestine; and what was the result of the trial?

Mr. M. MacDonald: Inspector Goddard was charged on 22 counts, all of which were in connection with the traffic in illegal immigration. He was found guilty on all the counts. but was released on entering into a bond, in the sum of £200 with one surety in £200, to keep the peace and be of good behaviour for the period of two years.

Sir N. Stewart Sandeman: Is it not a perfectly absurd sentence when a man in a responsible position has taken bribes against the Government and is let off with practically only having to find security? Is it possible for anything further to be done about the matter?

Mr. MacDonald: It is not a question for His Majesty's Government or the Administration of Palestine.

Sir Ernest Bennett: Is it a fact that this corrupt police officer has been dismissed?

Mr. MacDonald: That is another question, on which I am making inquiries. I am not in a position to give an answer.

MINISTER'S BROADCAST.

Mr. T. Williams: asked the Secretary of State for the Colonies what were the terms and conditions on which he broadcast from Geneva to America on the Government's White Paper policy for Palestine?

Mr. M. MacDonald: During my recent visit to Geneva I was invited by the National Broadcasting Company of America to talk over the wireless to the United States on the subject of the Government's Palestine policy. Such invitations have on other occasions been accepted by Ministers attending meetings connected with the League of Nations in Geneva, and I gladly agreed to this proposal.

Mr. Williams: Is it not unusual, on a matter about which the House is so keenly divided, for a Minister on an official visit to Geneva to take the opportunity of broadcasting an ex-parte statement to America?

Mr. MacDonald: What I did was entirely according to precedent, and I cannot see any objection to it.

Mr. Williams: In view of the arrangement between all political parties in this country in regard to broadcasting, does the right hon. Gentleman not think that some similar arrangement might have been made in this case?

Mr. MacDonald: That is entirely a matter for the broadcasting authorities in America.

Mr. Leach: How did the right hon. Gentleman excuse his great betrayal?

BOMB EXPLOSIONS, HAIFA.

Mr. MacLaren: asked the Secretary of State for the Colonies how many bomb explosions have taken place in the market place in Haifa since June, 1938; also the number of killed and wounded in each explosion, indicating in each case, the number of women, men and children sufferers?

Mr. M. MacDonald: Three bomb explosions have taken place in the vegetable market in Haifa since June, 1938. The casualties caused by these explosions were as follow: On 6th July, 1938, 21 persons were killed and 61 wounded; on 26th July 53 persons were killed and 45 wounded; and on 19th June of this year, 18 persons were killed and 24 wounded. I am unable to say how many. of these were men, women and children.

Sir N. Stewart Sandeman: Could the right hon. Gentleman tell us the nationality of these victims?

Mr. MacDonald: I should require notice before dividing them up, but, as far as my recollection goes, the great majority were Arabs.

Mr. MacLaren: asked the Secretary of State for the Colonies (1) what official inquiries have been made into the bomb explosions in Haifa; and whether, as a result of these inquiries, he is in a position to state who were the persons directly responsible for these criminal acts;
(2) whether the bomb explosions in Haifa were within the vicinity of the police station; and what precautions were taken by the police to prevent the recurrence of the explosions?

Mr. MacDonald: I have received no detailed reports covering the points raised in these questions, but am asking the High Commissioner for Palestine for full information.

JEWISH EXTREMISTS.

Sir E. Bennett: asked the Secretary of State for the Colonies why, in view of the many criminal activities of the Irgun Tzvai Le-Umi, national military organisation, the leaders of this Zionist society have not been arrested and prosecuted?

Mr. M. MacDonald: The hon. Member may rest assured that the activities of


organisations such as that referred to in the question are carefully watched by the Palestine Government. I have no doubt that in any case where action was found necessary it would be promptly taken. In fact, a considerable number of Jewish extremists are at present under detention in Palestine.

Mr. Crossley: Have the Government discovered the whereabouts of the illegal broadcasting station belonging to these people?

Mr. MacDonald: Not according to my latest information.

Oral Answers to Questions — RHODESIA AND NYASALAND.

Mr. Creech Jones: asked the Secretary of State for the Colonies whether consideration has been given by His Majesty's Government to the report of the Royal Commission on the Future Relations of Northern Rhodesia, Nyasaland, and Southern Rhodesia; and how soon he will be in a position to make a statement on the matter?

Mr. M. MacDonald: As I explained in the Debate on the Colonial Office Vote, His Majesty's Government, before giving detailed consideration to the recommendations of the Royal Commission, are awaiting reports from the Governors of Northern Rhodesia and Nyasaland, and an opportunity of discussion with the Prime Minister of Southern Rhodesia. Mr. Huggins is expected to arrive in London next week.

Mr. Creech Jones: In view of the visit of Dr. Huggins to discuss this matter, will the Government not commit themselves until there has been an opportunity for this House to express its views?

Mr. MacDonald: That is another matter. Perhaps the hon. Member will put that question down.

Oral Answers to Questions — BRITISH GUIANA.

Mr. Creech Jones: asked the Secretary of State for the Colonies whether he has considered the report of the Leonora Inquiry Commission in respect of the disturbances and loss of life in British Guiana; and whether active steps are being taken to secure better relations between the organised workers and the employers as suggested in paragraph 129?

Mr. M. MacDonald: While I am in full agreement with the views expressed in paragraph 129 of the report of the Leonora Inquiry Commission as to the desirability of securing a peaceful settlement of labour disputes in British Guiana by negotiation, I must await the Acting Governor's observations on the report before considering how this object can best be achieved.

Oral Answers to Questions — SEYCHELLES.

Mr. David Adams: asked the Secretary of State for the Colonies whether he has considered the resolutions from the Seychelles Taxpayers' Association, a body representative of all classes in this colony excepting Government officials, requesting an amendment to the Constitution whereby adequate popular representation of the inhabitants may be secured and a reduction in the excessive costs of the administration; and what action he proposes in the matter?

Mr. M. MacDonald: The resolutions to which the hon. Member refers were addressed to the Governor, and I have not yet received any communication from him in regard to them. I am not in a position yet, therefore, to comment upon them.

Mr. Adams: I have had information in my possession for some six weeks, from which the Minister appears to be singularly ill-advised on the subject.

Oral Answers to Questions — SIERRA LEONE.

PROSECUTION.

Mr. Creech Jones: asked the Secretary of State for the Colonies whether he is now in a position to make a statement regarding the prosecution of George Pratt in Sierra Leone; why this man was detained in prison for one month and eight days, and bail refused by the police magistrate; whether compensation will be paid; whether he is aware that this man had committed no offence warranting his arrest and that the evidence of the prosecution was disproved in the Supreme Court; whether he will take the necessary steps to stop prosecutions for opinion and trade union activity in West Africa; and whether he will reform the police service?

Mr. M. MacDonald: As regards the first and second parts of the question, I would


refer the hon. Member to the reply given to the hon. Member for West Fife (Mr. Gallacher) on 15th June; as regards the third part, the answer is in the negative; as regards the fourth part, I am unable to agree to the apparent suggestion that there was no justification for this man's arrest or for his prosecution, since the local authorities held the view that a reasonable prima facie case had been made; as regards the fifth part, I am not aware that any such prosecution has taken place; as regards the sixth part, perhaps the hon. Member would communicate with me if he has details of any definite complaint against the police which he would wish to have investigated.

Mr. Creech Jones: What justification was there for keeping this man in prison for one month and eight days without bail; and, in view of the general industrial disquietude in this territory, is not this method of prosecution likely to arouse some considerable suspicion and distrust in the administration?

Mr. MacDonald: The first part of the hon. Member's question was answered very fully in the long statement which was made by the Dominions Secretary in the answer to which I have referred.

Mr. Paling: Would it not be better to try to improve the wretched conditions in which these people are living and working in that country rather than to adopt these repressive measures?

LEGISLATIVE MEASUEES

Mr. de Rothschild: asked the Secretary of State for the Colonies whether he has yet had an opportunity of studying the texts of the Deportation, Sedition, and Undesirable Literature Bills and of the Trade Union and Trade Disputes Bill, which have been under discussion in the legislative council of Sierra Leone; and whether, before coming to a decision, he will take steps to ascertain the views of those who oppose these Measures?

Mr. M. MacDonald: I have not yet received copies of each of the Bills as passed by the Legislative Council. Copies of the Sedition Ordinance, and of the Undesirable Publications Ordinance, have reached me and are being placed in the Library of the House. I am asking the Governor to inform me of the particular points on which the Measures

have been opposed, and will consider these in the course of my examination of the ordinances when they arrive.

Mr. Sorensen: When is the right hon. Gentleman likely to make some decision regarding the features of these ordinances, and is he not aware that there is in West Africa considerable resistance to and resentment at the ordinances?

Mr. MacDonald: I shall have to await the arrival in this country of the ordinances before I can make any statement. I am not certain when they will arrive. I am aware of the situation which the hon. Member described, but I am satisfied that a great deal of the agitation is due to a misapprehension as to what is contained in the ordinances.

Mr. Paling: Does the Minister think that the adoption of repressive legislation is the best way of considering the interests of the people of this Colony?

Mr. MacDonald: I could not agree that it is repressive legislation. Examination of the ordinances, which will be placed in the Library of the House as soon as they arrive, will convince every Member of the House that that is so.

Mr. Maxton: Why does the right hon. Gentleman say that he must await the arrival of these ordinances, when they were sent out by the Colonial Office earlier on? The right hon. Gentleman sent them out.

Mr. MacDonald: That is not the position. In some cases we did send them out as model ordinances, but the Bills which were introduced in the Colony differed somewhat from them. I have been in communication with the Governor since, regarding this matter, but I do not know in what form the ordinances were finally passed.

Mr. Maxton: Does the right hon. Gentleman know that I have read in the most recent issue of a Sierra Leone newspaper a verbatim report of the Governor's speech in which the Governor said that these matters were sent out to him by the right hon. Gentleman?

Mr. MacDonald: I said that there was some misunderstanding. Some of the ordinances referred to were based on model ordinances which we sent out some time ago. The Bills, as introduced, differ in some respects. In other cases


they are not based on the model ordinances sent out from the Colonial Office. I have been in communication with the Governor on certain details of the Bills as introduced, and I made certain suggestions, but because I am not certain of the final form in which they were passed I cannot make any further statement now.

Mr. Stephen: Will the right hon. Gentleman issue a White Paper?

WAGES.

Mr. Paling: asked the Secretary of State for the Colonies the rate of wages paid to casual labourers and domestic workers on farms in Sierra Leone?

Mr. M. MacDonald: I understand that casual labour in the Colony area is paid at the rate of 1s. 3d. a day, and that in the Protectorate the rate ranges from 8d. to 10d. a day. Domestic workers on farms in the Colony are paid from 5s. to 10s. a month, with rations. There is no such paid labour in the Protectorate.

Mr. Paling: Is there any considerable amount of casual or domestic labour that is not paid any wage at all, but only rations?

Mr. MacDonald: I think that that must apply to the Protectorate, as my answer suggests. As regards the Colony area, the answer is as I have stated.

Mr. Paling: Has the right hon. Gentleman any idea of the number of people who work under these conditions; and, if they do work under these conditions, how do they manage to pay their taxes?

Mr. MacDonald: I could not say without notice what the number of people is. As regards the latter part of the hon. Gentleman's supplementary question, the taxes are comparatively low, and, as they receive wages in addition to rations, I understand that it is possible for them to pay their taxes out of their wages.

MARAMPA MINE (DISPUTE).

Mr. Paling: asked the Secretary of State for the Colonies the reasons for the strike of 3,000 labourers at the Marampa mine, Sierra Leone, from 2nd May to 22nd May; and the wages paid to the labourers?

Mr. M. MacDonald: I understand that the requests put forward by the strikers

were, first, for an increase in wages because of an increase which had recently been granted by the company to the grade of chief headmen; and, secondly, for payments during absences from work owing to injury. At the time of the strike, the labourers were being paid at the rate of 9.d. a day, together with an issue of rice. The strikers returned to work on 22nd May, and I am informed that an increase in pay, to 10d. a day with the ration of rice, was granted with effect from 1st June. With regard to the other request, the men's representatives were informed that compensation on the basis of the provisions of the draft Workmen's Compensation Bill would be granted in all cases of accident occurring on or after 1st June, 1939.

Mr. Paling: Is it any wonder that men working at mining and paid 9d. and 10d. a day should revolt; and will the Colonial Secretary give his attention to these scandalously low wages and conditions?

Mr. MacDonald: That raises a very large subject, with which I could not deal in answer to a question, but I did, in the course of the Debate on the Colonial Office Estimates, indicate that it was a great mistake to compare rates of wages in the Colonies with rates of wages here, because the conditions are totally different.

Oral Answers to Questions — COLONIES (WORKMEN'S COMPENSATION).

Mr. Mainwaring: asked the Secretary of State for the Colonies what Colonies, respectively, have adopted or failed to adopt workmen's compensation laws; whether a model scheme submitted by the Colonial Office includes a schedule of industrial diseases; and whether natives engaged in mining are at present protected against such diseases in any Colony?

Mr. M. MacDonald: As the answer is necessarily of some length, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

The Dependencies falling within the purview of the Colonial Office in which comprehensive workmen's compensation legislation has been enacted are Aden, British Guiana, Ceylon, the Falkland Islands, the Federated Malay States, Grenada, Jamaica, the Leeward Islands,


Malta, Mauritius, Northern Rhodesia, Palestine, St. Helena, the Straits Settlements, Trinidad and the Unfederated Malay States of Johore, Kedah and Trengganu. In the case of Northern Rhodesia, the Workmen's Compensation Ordinance applies only to non-natives, but provision for the payment of compensation to native workers for injuries sustained in the course of their employment is made in the Employment of Natives Ordinance, 1930. Provision of a similar nature is made in the Labour Regulations of Nigeria. The enactment of comprehensive workmen's compensation legislation is under consideration at the present time in Cyprus, Seychelles, Hong Kong, Fiji and certain of the Western Pacific High Commission Territories, Barbados, St. Lucia, St. Vincent, West Africa (Nigeria, Gold Coast, Sierra Leone and Gambia) and East Africa (Kenya Uganda, Tanganyika Territory, Northern Rhodesia, Nyasaland and Zanzibar). In the case of the East and West African Dependencies, the Governments have been asked to consider framing the proposed legislation on the lines of a draft ordinance prepared in the Colonial Office, which I assume is the model scheme referred to by the hon. Member in the second part of his question. A number of Colonial Dependencies, including Barbados, Gibraltar, Jamaica, the Somaliland Protectorate and Tanganyika Territory, have enacted employer's liability or other legislation, which provides for the payment of compensation for injuries arising out of defects in machinery or plant, etc., or negligence on the part of the employer or his agents. In the mining legislation in force in Kenya, Uganda, Tanganyika Territory, Nyasaland, Nigeria, Sierra Leone and Cyprus, provision is made for the payment of compensation for injuries arising from work in mines, and in certain other Dependencies legislative provision is made for compensation for injuries arising out of boiler explosions.

With regard to the second part of the question, the draft ordinance communicated to the East and West African Governments does not include a schedule of industrial diseases such as that annexed to the United Kingdom Workmen's Compensation Acts. Full consideration was given to the question whether the International Labour Convention concerning

Workmen's Compensation for Occupational Diseases should be applied to the Colonial Dependencies after its ratification by His Majesty's Government in the United Kingdom; but it was pointed out that considerable difficulties were likely to be experienced in diagnosing the diseases specified in the Convention, and in determining whether, in any particular case, the disease was in fact directly and specifically attributable to the workman's employment. It had been found by experience in the United Kingdom that, even when the case had been dealt with by a medical practitioner familiar with the particular employment, and practising in a district where the particular occupational disease was most usually found, it was frequently necessary for the case to be referred to a specially qualified medical referee, appointed by the Secretary of State for the Home Department to deal with such cases. These difficulties would be intensified in the Colonial Dependencies, owing to the paucity of medical practitioners with the necessary specialised knowledge and experience. There was also reason to believe that, if such provisions were included, the cost of insurance cover would be substantially higher. It was therefore considered that in Colonial Dependencies where there were industries in which occupational diseases might be contracted, the preparation of appropriate regulations would require special care, and that, in the meantime, it would be inadvisable and inequitable to place employers under statutory liability to pay compensation in respect of such diseases. A certain number of Colonial Dependencies, including the Straits Settlements, the Federated Malay States, the Unfederated Malay States of Johore, Kedah and Regan, Malta, Ceylon, Mauritius and Northern Rhodesia, have scheduled to their workmen's compensation legislation a certain number of occupational diseases which include one or more of those specified in the International Convention.

With regard to the last part of the question, all the Colonial Dependencies in which mining operations are conducted, namely, British Guiana, Ceylon, Cyprus, the Federated and Unfederated Malay States, Fiji, Gold Coast, Kenya, Nigeria, Northern Rhodesia, Sierra Leone, Tanganyika Territory, Trinidad and Uganda, have either special Mines Departments or


inspectors of mines whose responsibility it is to see that mining workers are adequately protected.

Oral Answers to Questions — COLONIAL AFFAIRS (PARLIAMENTARY CONTACT).

Lieut.-Commander Fletcher: asked the Prime Minister whether he has any statement to make regarding the establishment of a Standing Parliamentary Committee for Colonial affairs?

The Prime Minister: I am not yet in a position to add to the reply which I gave to the hon. and gallant Member on 12th June.

Lieut.-Commander Fletcher: In view of the great interest which is taken in this matter in all quarters of the House, may I ask the right hon. Gentleman whether he expects to be able to make a statement before the Recess?

The Prime Minister: There is another question on the Paper on this subject.

Mr. Riley: asked the Secretary of State for the Colonies whether he has had under consideration the growing demand to set up a Standing Parliamentary Committee for Colonial affairs; and whether, in view of the pressing urgency of many colonial problems, he will be able to make an early statement to the House?

Mr. M. MacDonald: I am aware that the proposal referred to is looked upon with favour in various quarters. I am considering it not only on its own individual merits, but also in. connection with the wider question of the adequacy of existing machinery for carrying out Colonial policy. I can assure the House that we are proceeding in the matter as rapidly as is consistent with a thorough examination of so wide a problem, but I cannot yet say when I shall be in a position to make a further statement.

Mr. Petherick: Is there anything whatsoever to prevent groups of Members of one or of all parties joining together to consider our Colonial problems, and would that not be a better course than undermining the Constitution by setting up a new body which would not be a constitutional body?

Mr. MacDonald: All sorts of considerations arise on this matter, including that which my hon. Friend has mentioned. I can only say that we are taking every

aspect of the proposal into consideration before coming to a decision.

Mr. Noel-Baker: Does not the last Debate on the subject show conclusively that some kind of Standing Parliamentary Committee is very urgently required?

Oral Answers to Questions — MILLING (RURAL AREAS).

Mr. De la Bère: asked the Chancellor of the Duchy of Lancaster the per centage of the total milling capacity in this country that is dispersed among the inland towns as compared with the total milling capacity, which includes the port mills?

The Chancellor of the Duchy of Lancaster (Mr. W. S. Morrison): As I stated on 14th June in reply to a question by my hon. Friend, a substantial proportion of the total milling capacity of the country is dispersed among inland towns, and there is still in the aggregate an excess capacity as compared with peace time requirements. I do not consider that it would be in the public interest to supplement these particulars in the way my hon. Friend now desires.

Mr. De la Bère: Does my hon. Friend really mean to tell the House that he has no figures in connection with a matter which comes under his direct purview; can he possibly suggest that it is against the public interest that any further additional milling should be done in the rural areas—surely there can be no secret about it—and is my right hon. Friend unable or unwilling to do it?

Oral Answers to Questions — NIGERIA (TRADE REPRESENTATIVES).

Mr. Bracken: asked the Secretary of State for the Colonies whether he will instruct the Government of Nigeria to appoint full-time trade representatives in London, New York, and other centres of world trade?

Mr. M. MacDonald: I am communicating this suggestion to the Governor, and asking him for his view on the subject.

Oral Answers to Questions — JAMAICA.

Mr. Riley: asked the Secretary of State for the Colonies whether he has yet received the scheme for land settlement in Jamaica announced by the Government of Jamaica, in May, 1938, and if so,


whether he will have a copy of the scheme placed in the Library?

Mr. M. MacDonald: I understand that copies of the scheme are on their way to me now. On their arrival I will arrange for one to be placed in the Library of the House.

Mr. Riley: What is the reason for the delay, in view of the fact that the scheme was announced by the Jamaican Government 12 months ago?

Mr. MacDonald: The scheme was announced in principle 12 months ago, but since then a considerable amount of detailed working out has had to be done. What I am expecting now is the detailed scheme. The immediate cause of the delay in my receiving at any rate the first copy is, I understand, that this copy is in the "Yankee Clipper."

Mr. Day: asked the Secretary of State for the Colonies whether the unrest which occurred between the banana porters employed in the parish of St. James and one of the ports of St. Mary, Jamaica, has been settled; whether there were disorders, and can he give particulars of any settlement offered or arrived at?

Mr. MacDonald: So far as I am aware, there has been no recent unrest among the banana porters, and no port in the parish of St. Mary has been affected.

Mr. Day: Does the Minister consider that the situation between the natives and the employers is normal?

Mr. MacDonald: There is no industrial trouble.

Oral Answers to Questions — WEST INDIES (COMMISSION'S REPORT).

Mr. Riley: asked the Secretary of State for the Colonies whether he has yet received the report of the Royal Commission on the West Indies; and, if so, when he expects to circulate it to Members?

Mr. M. MacDonald: I have not yet received the report of the Royal Commission, and I understand that it will not be ready before the end of the present Session.

Colonel Arthur Evans: When publishing the Royal Commission's report will my right hon. Friend consider publishing at the same time a White Paper setting out the action which His Majesty's Government propose to take in relation to its recommendations?

Mr. MacDonald: That is a matter which will fall to be considered when we have the report. I can assure my hon. and gallant Friend that the Government will be anxious to announce their policy as soon as possible after they have considered the report.

Oral Answers to Questions — COLONIAL ADMINISTRATION (CONVERSATIONS).

Mr. de Rothschild: asked the Secretary of State for the Colonies whether he has any statement to make regarding the recent conversations he had in Paris with the French Colonial Minister; what subjects came under discussion, and whether any conclusions were arrived at?

Mr. M. MacDonald: The purpose of the meeting between M. Mandel and myself was not to discuss any particular aspect of colonial affairs, or to reach any conclusions, but to discuss questions of colonial administration generally. I welcomed this opportunity of meeting the French Colonial Minister personally, and of comparing French and British experience in colonial government.

Oral Answers to Questions — CYPRUS.

PRESS RESTRICTIONS.

Mr. Graham White: asked the Secretary of State for the Colonies whether he is now in a position to make a further statement on the censorship of the Press in Cyprus?

Mr. Mathers: asked the Secretary of State for the Colonies whether he is now in a position to make a statement regarding the renewal of newspaper censorship in Cyprus, especially in relation to "Embros"; and whether he has approved of the suppression of the comments published in that newspaper?

Mr. Cocks: asked the Secretary of State for the Colonies whether he can make a statement regarding the present position in Cyprus?

Mr. M. MacDonald: As my right hon. Friend the Secretary of State for Dominion Affairs said in answer to a question on 14th June, there has been no reimposition of the censorship on any newspaper. But a communication was made to the editors of newspapers warning them against printing material concerning certain political matters. I am


still in communication with the Acting Governor on the question, and am not at present in a position to make a statement. But if the hon. Members will repeat their questions next Wednesday, I hope to be in a position to make a full statement then.

Mr. Dingle Foot: Will not the right hon. Gentleman say what were the political matters in respect of which the newspapers were asked not to print?

Mr. MacDonald: I am making certain inquiries of the Acting Governor, and would prefer to make a comprehensive statement dealing with all these matters next week.

Mr. Cocks: In view of the fact that the population of Cyprus is mainly Greek or Turkish, and that both Greece and Turkey arc now our allies, why should there be any trouble at all?

IRRIGATION, MESAORA PLAIN.

Sir N. Stewart Sandeman: asked the Secretary of State for the Colonies whether, in view of the recent report of Mr. Raeburn, water engineer to the Cyprus Government, that underground water cannot be used for the irrigation of the Mesaora Plain, he has any alternative scheme to put forward?

Mr. M. MacDonald: I have had an opportunity of studying Dr. Raeburn's most recent report. I understand from it that, while he is unable to recommend deep boring for water, he is of the opinion that nearer the surface water is likely to be available in considerable quantities and to be of great utility.

Sir N. Stewart Sandeman: Would it not be very much better to send out an irrigation officer who really understands the matter, instead of taking the report of a water engineer?

Mr. MacDonald: That matter has been considered very carefully in the past, and, after careful consideration, it was decided to send out this extremely competent water engineer.

Sir N. Stewart Sandeman: Is a water engineer quite good enough for Cyprus, where irrigation is an essential necessity?

PETITIONS.

Mr. Paling: asked the Secretary of State for the Colonies why the efforts being made in Cyprus to submit petitions

to the Governor, giving an assurance of the people's loyally and declaring their wish for constitutional liberties in both the central and local administrations have been suppressed; did he approve of the appointment of a municipal councillor of Nicosia being revoked on the ground that he had taken part in the preparation and signing of the petitions; and whether he is aware that four councillors of Famagusta resigned as a protest against the Government's attitude in this matter?

Mr. M. MacDonald: I am not aware of any action answering to the description contained in the first part of the hon. Member's question. I have received no report from the Governor regarding the facts alleged in the second and third parts, but am making inquiries.

Oral Answers to Questions — CEYLON.

Sir N. Stewart Sandeman: asked the Secretary of State for the Colonies, how many Tamils who have acquired citizenship in Ceylon have been dismissed from Government employment?

Mr. M. MacDonald: The Ceylon Government's decision to discharge certain daily paid employés of the Government is confined to non-Ceylonese who have been engaged since 1st April, 1934. According to the Ministers' statement of policy, the status of Ceylonese is acquired for this purpose by birth in Ceylon, and Ceylonese, whether of Tamil or other extraction, are not, therefore, affected.

Mr. T. Smith: Can the right hon. Gentleman say how many of these Tamils have been dismissed, and what is the real reason for the dismissal? Is there anything political in it?

Mr. MacDonald: This may involve 'the sending back to India of anything up to 1,000 Indians. The reason for the policy that the Ministers are pursuing is that a certain amount of retrenchment is going on, and I understand that it is the policy of the Government to give preference in Government employment to Ceylonese over others who come into the island from outside.

Mr. Wise: Are not these Tamils the only people of any honesty and industry in the entire island?

Oral Answers to Questions — WEST AFRICA (NATIVES).

Mr. Sorensen: asked the Secretary of State for the Colonies whether he has any further information to give the House respecting unrest in West Africa; whether he is aware of continued protests and resentment against the recent ordinances; and whether, in view of the pressing need of securing the friendship of African natives and of demonstrating more fully the enlightened policy of British colonial administration, he proposes to take more drastic steps immediately and satisfactorily to deal with the West African grievances that have given rise to discontent?

Mr. M. MacDonald: I have no reason to think that there is unrest in West Africa generally. I am aware that protests have been made against certain Sierra Leone ordinances, but there has, I think, been some misapprehension as to the nature and object of the legislation. Copies of the ordinances are to be placed in the Library of the House. I am aware, too, that dissatisfaction with conditions of labour has been expressed in certain quarters in Sierra Leone, but, as I have previously stated, an experienced Labour Secretary has been appointed to Sierra Leone. He is to take up his duties next month, and one of his tasks will be to review and advise upon such matters.

Mr. Sorensen: Does the right hon. Member realise that there is considerable discontent in the whole of West Africa, and that even though it may be centred in Sierra Leone, the whole of the natives of West Africa identify themselves with the attitude adopted in Sierra Leone?

Oral Answers to Questions — TRANSPORT.

LICENSING.

Colonel Sandeman Allen: asked the Minister of Transport whether his attention has been drawn to the decision of the appeal tribunal in the McNaughton case, where an A licence was refused because he had changed the places to which he had previously been operating; and will he take legislative action to prevent a system of route licensing being imposed without the sanction of Parliament?

The Minister of Transport (Captain Wallace): I am aware of the decision referred to by my hon. and gallant

Friend, but I do not think that he correctly states the reasons for it. The appeal in question was refused not because the applicant had changed the places to which he had previously been operating, but because he had failed to produce any evidence of the need for the facilities for which he was applying. No question arises of the imposition of a system of route licensing such as my hon. and gallant Friend suggests.

ACCIDENTS, ROSSINGTON BRIDGE.

Mr. T. Williams: asked the Minister of Transport how many accidents have occurred at Rossington Bridge, near Doncaster, during the last five years; and how many lives were lost?

Captain Wallace: Five road accidents involving personal injury have occurred at Rossington Bridge, near Doncaster, during the last five years. One of these accidents involved the death of two persons.

Mr. Williams: Has the right hon. Gentleman's Department yet sanctioned the new scheme in connection with this bridge?

Captain Wallace: The bridge is at a section of the road that will be by-passed by the proposed Doncaster By-pass. That is not in contemplation in the near future. My divisional road engineer does not consider that the bridge in question presents, any danger to traffic proceeding with. normal care.

Oral Answers to Questions — NEW ZEALAND (AIRCRAFT PRODUCTION AND PILOTS' TRAINING).

Mr. Arthur Greenwood: (by Private Notice) asked the Secretary of State for Air whether he is able to make any announcement in regard to the recent Air Mission to New Zealand.

Sir K. Wood: I am glad to be able to announce that complete agreement has been reached between His Majesty's Government in New Zealand and His Majesty's Government in the United Kingdom on the recommendations of the recent Air Mission to New Zealand and certain matters arising out of it. These recommendations have two inter-related aims, namely:

(i)The creation in New Zealand of manufacturing capacity for the production of aircraft;


(ii) the expansion of training facilities in the Dominion with a view to increasing the output of fully trained flying personnel for the Air Forces of both countries in peace and war.
With this end in view, the Mission recommended, first, that the New Zealand Government should place an immediate order for training aircraft to be manufactured in New Zealand by the de Havilland Company, which will enable the Company to proceed at once with the establishment of an aircraft factory in the Dominion; and, secondly, the establishment of further flying training facilities in New Zealand. In this latter connection I should explain that there has been in operation for some time a scheme under which a number of Dominions pilots have been trained annually for the Royal Air Force. The additional training facilities now to be established will enable the number to be raised to 220 a year in peace, and would put New Zealand in a position to send overseas in the event of war not less than 1,300 fully trained pilots and other flying personnel annually.
The New Zealand Government have intimated that they have decided to implement both these recommendations at once; and by way of contribution to the cost involved in these two important projects the United Kingdom Government have agreed to make an increase in the grants paid under the present training scheme.
I am sure that the House will agree that the further assistance thus given by the Dominion of New Zealand will be a most valuable contribution to Imperial Defence. I should also like to take this opportunity of expressing the thanks of His Majesty's Government to Sir Hard-man Lever and his colleagues for their valuable work.

Mr. Thorne: Does it not seem rather strange that, in consequence of this agreement between this country and New Zealand, the Bank of England are trying to impose an embargo on the New Zealand loan?

Mr. Simmonds: Could my right hon. Friend assure the House that, notwithstanding the great need for trained personnel here, if the New Zealand Government require any trained personnel from

the Royal Air Force he will do his best to loan that personnel?

Sir K. Wood: If that matter arises, I shall be glad to consider it.

Oral Answers to Questions — QUESTIONS TO MINISTERS.

Mr. Kennedy: Mr. Speaker, I beg to ask you the following question, of which I have given you private notice: whether you have observed the growing number of Oral Questions to Ministers remaining unanswered on account of their not being reached before 3.45 p.m. and whether you are prepared to consider for a time a change of procedure, limiting the right to ask supplementary questions to Members of the House whose questions are given in writing to the Clerk at the Table or an extension of the time devoted to questions?

Mr. Speaker: I have noticed that almost every day a large number of questions which are on the Paper remain unanswered, but, I have, I think, on several occasions called the attention of the House to the number of supplementary questions which make it difficult for hon. Members having questions later on to be answered. But I should prefer to leave the matter to the good sense and discretion of hon. Members themselves rather than make any suggestion for a change in our procedure at present. At the same time, I do think that the position is unsatisfactory, and, unless some improvement takes place, it might well be a matter for the serious consideration of the House.

Sir Percy Harris: Are you aware, Mr. Speaker, that the House feels that the most valuable part of Question Time consists of the supplementaries, and that nothing in our procedure should be done to limit the privilege of asking supplementaries when we get unsatisfactory replies to our questions?

Mr. Thorne: May I ask the Prime Minister whether, in consequence of the many questions put down day by day, he will consider the possibility of altering the Standing Orders so that we can have an extra quarter of an hour for questions each day?

The Prime Minister: I do not think that that would really make any difference.

Mr. Gallacher: Will the Prime Minister consider the suggestion that has been made by the right hon. Member for Kirkcaldy (Mr. Kennedy)?

Mr. A. Reed: Would it not be possible to limit the supplementaries of each Member to one supplementary in an afternoon, as that would save a tremendous number of supplementary questions?

Mr. Cocks: Rather than limit the number of supplementaries, would it not be better to reduce the number of starred questions from three to two?

Sir Frank Sanderson: Is it not possible to limit the number of questions to one per Member per day?

Mr. Maxton: Will you make it plain, Mr. Speaker, that you do not regard it as a bad thing that Members of this House should put down a large number of questions on the Paper and be keen to follow them to their logical conclusion?

Captain Strickland: I feel sure, Mr. Speaker, that you are aware that it is most difficult to put qestions to certain Ministers. I would mention in particular the Minister of Transport in view of the fact that he never takes the opening questions. It is the questions addressed to such Departments as the Ministry of Transport that suffer the most, and I do not know whether it is possible to arrange that each Minister in turn should take priority in answering questions.

Mr. Poole: Would it not help matters if we had definite answers from Ministers instead of having to extract them by a process of cross-examination?

Mr. Speaker: Hon. Members will remember that in my reply to the right hon. Member for Kirkcaldy (Mr. Kennedy) I said that I would prefer to leave the matter of questions to the good sense of hon. Members themselves as the best way of coming to a satisfactory conclusion.

Sir Cooper Rawson: What happens if the Member has not got any good sense?

Captain Strickland: Would not that still put the questions to certain Ministers at a great disadvantage?

Mr. Speaker: The hon. and gallant Member will realise that there are more Ministers than days in the week.

BUSINESS OF THE HOUSE.

Motion made, and question put,
That the Proceedings in Committee on Cotton Industry (Reorganisation) [Money] (No. 2) be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[The Prime Minister.]

The House divided: Ayes, 247;Noes, 135

Division No. 201.]
AYES.
[3.55 p.m.


Acland-Troyte, Lt.-Col. G. J.
Brown, Brig.-Gen. H. C. (Newbury)
Crowder, J. F. E.


Albery, Sir Irving
Browne, A. C. (Belfast, W.)
Culverwell, C. T.


Allen, Col. J. Sandeman (B'knhead)
Bull, B. B.
Davison, Sir W. H.


Amery, Rt. Hon. L. C. M. S.
Bullock, Capt. M.
De Chair, S. S.


Anderson. Rt. Hn. Sir J. (So'h Univ's)
Burgin, Rt. Hon. E. L.
De la Bère, R.


Anstruther-Gray, W. J.
Campbell, Sir E. T.
Denman, Hon. R. D.


Apsley, Lord
Cary, R. A.
Dodd, J. S.


Aske, Sir R. W.
Cayzer, Sir C. W. (City of Chester)
Doland, G. F.


Assheton, R.
Cazalet, Thelma (Islington, E.)
Donner, P. W.


Astor, Viscountess (Plymouth, Sutton)
Cazalet, Capt. V. A. (Chippenham)
Drewe, C.


Balfour, Capt. H. H. (Isle of Thanet)
Chamberlain, Rt. Hn. N. (Edgb't'n)
Duggan, H. J.


Beamish, Rear-Admiral T. P. H.
Channon, H.
Duncan, J. A. L


Beaumont, Hon. R. E. B. (Portsm'h)
Chapman, A. (Rutherglen)
Dunglass, Lord.


Beit, Sir A. L.
Chapman, Sir S. (Edinburgh, S.)
Eastwood, J. F.


Bennett, Sir E. N.
Chorlton, A. E. L.
Edge, Sir W.


Bird, Sir R. B. 
Churchill, Rt. Hon. Winston S.
Edmondson, Major Sir J.


Blair, Sir R.
Cobb, Captain E. C. (Preston)
Elliot, Rt. Hon. W. E.


Bossom, A. C.
Colfox, Major Sir W. P.
Elliston, Capt. G. S.


Boulton, W. W.
Colville, Rt. Hon. John
Emery, J. F.


Bower, Comdr. R. T.
Conant, Captain R. J. E.
Emmott, C. E. G. C.


Boyce, H. Leslie
Cook, Sir T. R. A. M. (Norfolk N.)
Emrys-Evans, P. V.


Bracken, B.
Cooke, J. D. (Hammersmith, S)
Entwistle, Sir C. F.


Braithwaite, J. Gurney (Holderness)
Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Evans, Colonel A. (Cardiff, S.)


Brass, Sir W.
Courthope, Col. Rt. Hon. Sir G. L.
Evens, D. O. (Cardigan)


Briscoe, Capt. R. G.
Craven-Ellis, W.
Everard, Sir William Lindsay


Broadbridge, Sir G. T.
Croft, Brig.-Gen. Sir H. Page
Fildes, Sir H.


Brocklebank, Sir Edmund
Crooke, Sir J. Smedley
Fleming, E. L.


Brooke, H. (Lewisham, W.)
Crookshank, Capt. Rt. Hon. H. F. C.
Fox, Sir G. W. G.


Brown, Rt. Hon. E. (Leith)
Crossley, A. C.
Fremantle, Sir F. E.




Furness, S. N.
Locker-Lampion, Comdr. O. S.
Russell, Sir Alexander


Glyn, Major Sir R. G. C.
Loftus, P. C.
Salmon, Sir I.


Goldie, N. B.
Mabane, W. (Huddersfield)
Salter, sir J. Arthur (Oxford U.)


Gower, Sir R. V.
MacDonald, Rt. Hon. M. (Ross)
Samuel, M. R. A.


Graham, Captain A. C. (Wirral)
McEwen, Capt. J. H. F.
Sandeman, Sir N. S.


Grant-Ferris, Flight-Lieutenant R.
Makins, Brigadier-General Sir Ernest
Sanderson, Sir F. B.


Granville, E. L.
Manningham-Buller, Sir M.
Sandys, E. D.


Grattan-Doyle, Sir N.
Margesson, Capt. Rt. Hon. H. D. R.
Schuster, Sir G. E.


Greene, W. P. C. (Worcester)
Markham, S. F.
Scott, Lord William


Gretton, Col. Rt. Hon. J.
Maxwell, Hon. S. A.
Selley, H. R.


Gridley, Sir A. B.
Meller, Sir R. J. (Mitcham)
Shaw, Captain W. T. (Forfar)


Grigg, Sir E. W. M.
Mellor, Sir J. S. P. (Tamworth)
Simmonds, O. E.


Grimston, R. V.
Mills, Sir F. (Leyton, E.)
Simon, Rt. Hon. Sir. J. A.


Guinness, T. L. E. B,
Mills, Major J. D. (New Forest)
Sinclair, Col. T. (Queen's U. B'lf'st)


Gunston, Capt. Sir D. W.
Mitchell, Sir W. Lane (Streatham)
Smith, Bracewell (Dulwich)


Hambro, A. V.
Moore, Lieut.-Colonel Sir T. C. R.
Snadden, W. McN.


Hannah, I. C.
Moreing, A. C.
Somerset. T.


Hannon, Sir P. J. H.
Morgan, R. H. (Worcester, Stourbridge)
Somervell, Rt. Hon. Sir Donald


Harbord, Sir A.
Morrison, G. A. (Scottish Univ's.)
Spears, Brigadier-General E. L.


Harvey, T. E. (Eng. Univ's.)
Morrison, Rt. Hon. W. S. (Cirencester)
Spens. W. P.


Haslam, Henry (Horncastle)
Munro, P.
Stewart, J. Henderson (Fife, E.)


Haslam, Sir J. (Bolton)
Neven-Spence, Major B. H. H.
Stewart, William J. (Belfast, S.)


Heilgers, Captain F. F. A.
Nicolson, G. (Farnham)
Storey, S.


Hely-Hutchinson, M. R.
Nicolson, Hon, H. G.
Stourton, Major Hon. J. J.


Heneage, Lieut.-Colonel A. P.
O'Connor, Sir Terence J.
Strickland, Captain W. F.


Hepworth, J.
Orr-Ewing, I. L.
Stuart, Lord C. Crichton- (N'thw'h)


Higgs, W. F.
Peake, O.
Stuart, Hon. J. (Moray and Nairn)


Hoare, Rt. Hon. Sir S.
Perkins, W. R. D.
Sueter, Rear-Admiral Sir M. F.


Holdsworth, H.
Peters, Dr. S. J.
Sutcliffe, H.


Howitt, Dr. A. B.
Petherick. M.
Tasker, Sir R. I.


Hudson, Capt. A. U. M. (Hack., N.)
Pickthorn, K. W. M.
Tate, Mavis C.


Hudson, Rt. Hon. R. S. (Southport)
Pilkington, R.
Taylor, C. S. (Eastbourne)


Hulbert, Squadron-Leader N. J.
Ponsonby, Col. C. E.
Taylor, Vice-Adm. E. A. (Padd., S.)


Hume, Sir G. H.
Pownall, Lt.-Col. Sir Assheten
Thomson, Sir J. D. W.


Hunloke, H. P
Procter, Major H. A.
Tree, A. R. L. F.


Hunter, T.
Radford, E. A.
Tufnell, Lieut.-Commander R. L.


Hutchinson, G. C.
Ramsay, Captain A. H. M.
Wallace, Capt. Rt. Hon. Euan


Jarvis, Sir J. J.
Ramsbotham, Rt. Hon. H.
Ward, Lieut.-Col. Sir A. L. (Hull)


Jennings, R.
Rankin, Sir R.
Ward, Irene M. B. (Wallsend)


Jones, Sir H. Haydn (Merioneth)
Rathbone, Eleanor (English Univ's.)
Wardlaw-Milne, Sir J. S.


Jones, L. (Swansea W.)
Rathbone, J. R. (Bodmin)
Watt, Lt.-Col. G. S. Harvie


Kerr, Colonel C.I. (Montrose)
Rawson, Sir Cooper
Wells, Sir Sydney


Knox, Major-General Sir A. W. F.
Rayner, Major R. H.
Williams, Sir H. G. (Croydon, S.)


Lambert, Rt. Hon. G.
Reed, A. C. (Exeter)
Wilson, Lt.-Col. Sir A. T. (Hitchin)


Lancaster, Lieut.-Colonel C. G.
Reed, Sir H. S. (Aylesbury)
Windsor-Clive, Lieut.-Colonel G.


Latham, Sir P.
Reid, J. S. C. (Hillhead)
Winterton, Rt. Hon. Earl


Lees-Jones, J.
Reid, W. Allan (Derby)
Wise, A. R.


Leech, Sir J. W.
Rickards, G. W. (Skipton)
Womersley, Sir W. J.


Leighton, Major B. E. P.
Ropner, Colonel L.
Wood, Rt. Hon. Sir Kingsley


Lennox-Boyd, A. T. L.
Rosbotham, Sir T.
Wragg, H.


Lewis, O.
Ross Taylor, W. (Woodbridge)
Young, A. S. L. (Partick)


Liddall, W. S.
Rowlands, G.



Little, J.
Royds, Admiral Sir P. M. R.
TELLERS FOR THE AYKS.—


Llewellin, Colonel J. J.
Ruggles-Brise, Colonel Sir E. A.
Captain Waterhouse and Captain Dugdale.




NOES


Adams, D. (Consett)
Davies, R. J. (Westhoughton)
Hills, A. (Pontefract)


Adams, D. M. (Poplar, S.)
Davies, S. O. (Merthyr)
Isaacs, G. A.


Adamson, Jennie L. (Dartford)
Day, H.
Jagger, J


Alexander, Rt. Hon. A. V. (H lsbr.)
Dunn, E. (Rother Valley)
Jenkins, A. (Pontypool)


Ammon, C. G,
Edwards, A. (Middlesbrough E.)
John, W.


Anderson, F. (Whitehaven)
Edwards, Sir C. (Bedwellty)
Jones, A. C. (Shipley)


Banfield, J. W.
Evans, E. (Univ. of Wales)
Kennedy, Rt. Hon. T.


Barnes, A. J.
Fletcher. Lt.-Comdr. R. T. H.
Kirby, B. V.


Batey, J.
Foot, D. M.
Kirkwood, D.


Bellenger F. J
Gallacher, W.
Lansbury, Rt. Hon. G.


Benn, Rt. Hon. W. W.
Gardner, B. W.
Lathan, G.


Benson, G.
Garro Jones, G. M.
Lawson, J. J.


Bevan, A.
George, Major G. Lloyd (Pembroke)
Leach, W.


Broad, F. A.
George, Megan Lloyd (Anglesey)
Lee, F.


Bromfield, W.
Graham D M. (Hamilton)
Leonard, W.


Brown, C. (Mansfield)
Green, W. H. (Deptford)
Leslie, J. R.


Burke, W. A.
Greenwood, Rt. Hon. A.
Logan, D. G.


Cape, T.
Grenfell, D. R.
Lunn, W.


Charleton, H. C.
Griffith, F. Kingsley (M'ddl'sbro, W.)
Macdonald, G.(Ince)


Chater, D.
Griffiths, J. (Llanelly)
McEntee, V. La T.


Cluse, W. S.
Hall, J. H. (Whitechapel)
McGovern, J.


Cynes, Rt. Hon. J. R.
Hardie, Agnes
MacLaren, A.


Cocks, F. S.
Harris, Sir P. A.
Maolean, N.


Collindridge, F.
Hayday, A.
Mainwaring, W. H.


Cripps, Hon. Sir Stafford
Henderson, A. (Kingswinford)
Mander, G. le M.


Daggar, G.
Henderson, J. (Ardwick)
Marshall, F.


Dalton, H.
Henderson, T. (Tradeston)
Mathers, G.







Maxton, J.
Ritson, J.
Thurtle, E.


Messer, F.
Robinson, W. A. (St. Helens)
Tinker, J. J.


Montague, F.
Sanders, W. S.
Viant, S. P.


Morrison, Rt. Hon. H. (Hackney, S.)
Seely, Sir H. M.
Walkden, A. G


Morrison, R. C. (Tottenham, N.)
Sexton, T. M.
Walker, J.


Naylor, T. E.
Silverman, S. S.
Watkins, F. C.


Noel-Baker, P. J.,
Simpson, F. B.
Watson, W. McL.


Oliver, G. H.
Sinclair, Rt. Hon. Sir A. (C'thn's)
Welsh, J. C.


Owen, Major G.
Smith, E. (Stoke)
Westwood, J.


Paling, W.
Smith, Rt. Hon. H. B. Lees- (K'ly)
Whiteley, W. (Blaydon)


Parker, J.
Smith, T. (Normanton)
Wilkinson, Ellen


Parkinson, J. A.
Sorensen, R. W.
Williams, E. J. (Ogmore)


Pearson, A.
Stephen, C.
Williams, T. (Don Valley)


Pethick-Lawrence, Rt|. Hon. F. W.
Stewart, W. J. (H'ght'n-le-Sp'ng)
Wilson, C. H. (Attercliffe)


Poole, C. C.
Stokes, R. R.
Windsor, W. (Hull, C.)


Pritt, D. N.
Strauss, G. R. (Lambeth, N)
Woods, G. S. (Finsbury)


Quibell, D. J. K.
Summerskill, Dr. Edith



Richards, R. (Wrexham)
Taylor, R. J. (Morpeth)
TELLERS FOR THE NOES.—


Riley, B.
Thorne, W.
Mr. Groves and Mr. Adamson.


Question, "That the Clause stand part of the Bill," put, and agreed to.

DEBT COLLECTORS (REGISTRATION AND LICENSING).

Mr. McGovern: I beg to move,
That leave be given to bring in a Bill to provide for the registration and licensing of debt collectors.
This Bill will apply only to Scotland. No matter what may be the political point of view of hon. Members I feel sure that after the evidence I shall submit they will agree that there is a necessity to stop what has become a very brutal ramp and dishonest practice of the worst kind amongst debt collectors, especially in the city of Glasgow. From time to tune during the past six years in this House I have mentioned glaring cases of fraudulent practices by a debt collector in my own division. Only two weeks ago this collector was brought before the Sheriff Court in Glasgow, and after a lengthy trial was sentenced to 12 months imprisonment for just the kind of practices that for six years I have brought to the notice of this House. Nowadays any man can start work as a debt collector without registration and without guarantees of any kind. I suggest that debt collectors should be registered.
Clause 1 provides that no person other than a qualified solicitor, accountant or sheriff officer shall act as a debt collector unless he has registered himself with the sheriff clerk of the county in which he wishes to act as such and has received from the said sheriff a licence so to act. The licence fee is to be £1 and a licence is to be valid for 12 months. Clause 2 states that the sheriff clerk shall have power to suspend or withdraw the licence when complaint has been made to him and he is satisfied that the debt collector has acted in a harsh and oppressive manner. Clause 3 provides that when a licence has been withdrawn or refused the

applicant may appeal to the sheriff, whose decision will be final. Clause 4 provides that where any person other than a qualified solicitor, accountant or sheriff officer acts as a debt collector for a fee or sets up a debt-collecting business without a licence, he will be guilty of an offence and subject to a penalty of £50 or three months' imprisonment. Clause 5 provides that the Act shall apply only to Scotland and shall come into operation on 1st January, 1940.
The methods that were employed by this debt collector are well known throughout the city of Glasgow. For example, people made payments to the collector, and after the payments had been made he denied that they were made. The common practice was to take the book from a poor woman who was paying him the monthly instalment granted by the court, to ask that he might retain the book which he would promise to deliver the following week, and then in the following week to deny that the book had been given to him or that it had ever been in his hands, then to issue fresh summonses, the result of which was to run up the account of the woman concerned. I have here the details of the account of a woman who contracted a debt of £1 2s. 6d. with this man. Before she was released from him she had paid the sum of £7 15s. In the case of another account the debt was £2 2s. 6d. and the sum paid was £11 10s. In a third case the debt was 12s. 6d. and the sum paid was £5 7s. 6d. No Member of this House would desire that practices of that kind should continue. In my opinion the weakness has been that there has been no supervision over a collector's conduct. If he had been compelled to apply for a licence every year the debtor could have complained, and when there was an


accumulation of evidence the sheriff or sheriff-clerk could at least suspend the licence pending an investigation of the case. These points came out in the court, where it was proved that the sums of money actually paid by certain people were obliterated from the collector's books, and it was only after careful examination that the authorities found that the sums paid were still to be found in the books though covered over by further writing.
These poor victims in Glasgow have to be defended. I am not here attempting to prevent any person who has an account due from any of these working people from getting that to which he is justly entitled. I am not even denying the ordinary debt collector or sheriff officer the legal fees that are granted by a court. I am not defending the evasion of responsibilities of that kind. I am asking only that the individuals, the poor people who have contracted debts, sometimes because of extreme unemployment and poverty and who are summoned to the courts, shall find in the courts the protection to which they are entitled, and that they shall not be the victims of blackmailing and terroristic tactics such as have been endured. I have gone to some of these individuals with money from charitable funds to wipe out the total debt of the victim. I have been met with a refusal even to clear the debt. I have had to bring witnesses to certify that I have offered to wipe out the debt. The collector has said to me, "I shall not take the full money. Send the woman to me and I shall take the 2s. a week from her." The desire was to get hold of the victim and to extract the last possible penny from her.
One of the illuminating results of these court cases in Glasgow was to show the difficulty of getting complete proof of the conduct of the collector because of the fact that his office staff had been bound up with him in this process, and it was only after a breach of the peace case in Glasgow that some of the things I have described came to the light of day. I ask the House for the simple protection of decent people, that we shall have a debt collector registered in a proper way and that he shall be subject to the general legal machinery of Scotland. I ask for leave to bring in this Bill because of the terrorism and the brutal conduct going

on in Glasgow every day, and I seek by the Bill to get protection for the people who are the victims.

Bill ordered to be brought in by Mr. McGovern, Mr. Neil Maclean, Mr. Maxton, Mr. Thomas Henderson, Mr. Stephen, Mr. Leonard, Mr. Buchanan, Mrs. Hardie and Mr. Davidson.

DEBT COLLECTORS (REGISTRATION AND LICENSING) BILL,

"to provide for the registration and licensing of debt collectors," presented accordingly, and read the First time; to be read a Second time upon Monday next, and to be printed. [Bill 177.]

MESSAGE FROM THE LORDS.

That they have agreed to,—

Amendments to—

Droitwich Canals (Abandonment) Bill [Lords], without Amendment.

That they have passed a Bill, intituled, "An Act to confirm a Provisional Order of the Ministry of Health relating to the urban district of Bethesda." [Ministry of Health Provisional Order Confirmation (Bethesda) Bill [Lords.]

And also a Bill, intituled, "An Act to confirm a Provisional Order of the Ministry of Health relating to the City of Bradford." [Ministry of Health Provisional Order Confirmation (Bradford) Bill [Lords].

MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (BETHESDA) BILL [Lords].

Read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 174.]

MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (BRADFORD) BILL [Lords].

Read the First time; and referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 176.]

LONDON GOVERNMENT BILL [LORDS].

Read the First time; to be read a Second time upon Thursday, 6th July, and to be printed. [Bill 178.]

AIR MINISTRY (HESTON AND KENLEY AERODROMES EXTENSION) BILL.

Minutes of Evidence taken this day reported from the Select Committee.

Minutes of Evidence to lie upon the Table, and to be printed. [No. 141.]

Orders of the Day — FINANCE BILL.

Considered in Committee [Progress, 27th June].

[COLONEL CLIFTON BROWN IN THE CHAIR.]

CLAUSE 14.—(Apportionment of income under Section 21 of Finance Act, 1922, to be automatic in the case of certain investment companies.)

4.13 p.m.

Mr. Spens: I beg to move, in page 11, line 26, to leave out "the whole of the," and to insert:
if and so long as—
(a) more than seventy-five per cent, of its.
This is the first of a series of Amendments which all hang together and which attempts to put forward one of three alternative methods of dealing with what we consider is a hardship to those individuals who happen to be interested in small companies running agricultural estates and who happen to be within the Surtax limits. Before I develop my point let me remind the Committee, first of all, that this Clause has nothing whatever to do with the assessment of any companies, estate, trading, investment or other, to Income Tax. It has solely to do with the assessment to Surtax of individuals who are interested in that company. I cannot help feeling that there has been a good deal of misunderstanding amongst a number of people who are interested in trading and estate companies, because of the belief that the basis on which they are at present assessed to Income Tax is being radically revised by this Clause. Nothing of the kind is happening. What is happening is that the basis on which individual shareholders are interested in these companies for Surtax assessment is being revised in a very radical manner. It is not a revision of their basis of assessment on income which is distributed and paid to them and which they receive. The basis of that assessment is exactly what it was before, but a very radical change is being made in their liability to Surtax for income which is held up by the company and which is not received by them at all.
As the law stands, there is power in the Commissioners to say to any small

private company, whatever it is, "You did not distribute your income to the amount which you ought to have distributed it last year, and unless you give us very good reasons why the income was not distributed, we propose to assess the individuals, who would have got the income if it had been distributed, to Surtax on the basis that they, in fact, received the money." Hitherto, any individual threatened with such a Surtax assessment has had the right to go before the Special Commissioners and say that there was very good reason in the interests of the company why that particular amount of income was not distributed. Under the Clause there is to be an automatic assessment in respect of the income of these companies which is not distributed, and there is to be no special appeal to the Commissioners by any individual in respect of the assessment. Individuals will find themselves being charged Surtax in respect of money which they have not received at all, and may not be able to receive, because they may be one out of five others, and the four others may think it best in the interests of the company to hold up the incomes for that year. The individuals who may be in the position of being liable to Surtax feel that a great deal of care and attention is necessary as to how an automatic assessment of this sort is going to work out.
The two particular types of companies which will be chiefly affected, and in which by far the majority of hard cases will arise, unless special provision is made, are companies formed for the purpose of trading and companies formed for the purpose of running an agricultural estate. In both of these cases my right hon. Friend has thought it right to put into the original Clause, or by an Amendment, certain special provisions. It is as regards these special provisions in respect of agricultural estates that we are asking him to reconsider what he has done. He proposes to except altogether from the operation of the Clause companies running agricultural estates whose sole income is derived from those estates, that is, income coming under Schedules A and B. On the face of it, it looks a very generous exception, but one must realise that there is not a single small company running an agricultural estate or farm in this country whose income is solely derived from the estate, because


inevitably such a company, after it has been going on for a few months, is bound to receive rents of furnished houses which are assessable under Schedule D. Therefore, so far as Sub-section (3) is concerned at the present moment, while it looks as if it were a generous concession, it really does not except any single company at all as far as we have been able to discover.
The operative part, so far as these estate companies are concerned, is Subsection (4). That provides that where an estate company has partly income from the estate, which comes under Schedules A and B, and partly income from some other sources, then that other income has got to be treated as if it belonged to quite a separate company, and has to be divided up to the hilt, or the shareholders of the company have to be assessed for Surtax on the basis that they have, in fact, received it. Why does any company running an agricultural estate or a set of farms not distribute its income up to the hilt? The reason, of courśe, is that in such a precarious business you have good years and bad years, and out of the income derived from other sources you have to make good the losses on your farming operations, or you have to provide for the bad season which may strike you the year after next. Do not let the Committee imagine that these companies are the perquisites of rich men. Many of them are companies established by a small group of farmers, one of whom may be in the unfortunate position of being a Surtax payer, and that is the individual who is hit by this Clause. The result to the companies who do this, if the Clause is left as it is, will be that in the bad year, when you want to use some of your income from other sources to make up your losses on your fanning, that is the very year in respect of which the individual shareholder will find himself assessed to pay Surtax as if he had received money which he never had in his pocket.
Therefore, we say that really this exception in favour of these estate companies is a delusion and we have put forward three alternative ways of dealing with what we suggest is a hardship on this particular type of company which will not in any way handicap or interfere with the pursuit of my right hon. Friend after those who abuse this method of company formation for the purpose of evading

Surtax. The first: suggestion is contained in the Amendment which I am moving, that we should except from the Clause altogether not a company whose whole income comes from the estates but a company whose income up to 25 per cent. comes from other sources; that is to say, a company which relies normally for 75 per cent. of its income from the estate but receives in any normal year 25 per cent. of its income from some other sources. If that were done it would enable those companies who up to 25 per cent. have an income from other sources to go on under the existing law. They would not get off their Surtax and would still be liable to be hauled before the Commissioners to explain their conduct.
The second alternative which we suggest is contained in a later Amendment. We suggest that Sub-section (4) should be amended so that in calculating the income which must be distributed, or the shareholders' liability to be assessed for Surtax on it, you should allow losses of income on the estate to be made good out of the income from other sources. In other words, you would allow a percentage of your net income from other sources, if in fact it is used to make good losses on the estate, to be regarded as finished and done with, and you would only assess the shareholder on the balance, and not on the gross income from other sources. That is an alternative which will go a long way to get us over the difficulties of this Clause. The third and last alternative we suggest is by our Amendment to the proposed new Sub-section (6). It would specifically exclude from the operations of the Clause a company wholly or mainly formed for the purpose of running an agricultural estate, just as the right hon. Gentleman proposes that a company mainly or wholly formed for carrying on trade enterprises should be excluded, for somewhat similar reasons.
I do not think that my hon. Friends and I very much care which of the three alternatives we may succeed in getting, but we hope that we may get one of them. We feel that to make a man assessable to Surtax in respect of income which he has never received, and take away from him his right of appeal which he has at present, is putting a very strong weapon in the hands of the Commissioners, and we feel that if we can show, as I hope I have, that the Clause will in


many instances, and particularly in the bad years, work very great injustice on any shareholder of a small company who happens to be within the Surtax limit, I hope the right hon. Gentleman will be able to see his way to meet us in one or other of the three alternatives.

4.29 p.m.

Brigadier-General Clifton Brown: I rise to support the Amendment which has been put forward so fairly and so plainly by my hon. and learned Friend. I quite understand the attitude of Members of the Opposition to these estate companies. It is quite logical. They contend that these estate companies are formed for dodging taxes. From that point of view they are quite logical in their attitude, but from the Government's point of view I cannot see that these proposals, so far as we understand them, are fair. Indeed, I think they are harsh on the small, struggling estate company which is really trying to develop the estate out of its income. I know several estates which have formed themselves into companies which have been able to bring water and electric light to the cottages on the estate and put the buildings in a better state of repair, and who, after some years, have been able to recoup themselves and make the company a paying concern.
The object of the Amendment is that investment income should be free of Surtax except where a profit is shown on the estate account. The Amendment provides that where an estate company shows a loss on the estate account its investment income to the extent required to cover its loss shall not automatically and without appeal be assessed to Surtax. It is very difficult for an estate company to remain a company interested only in land. You must have investment income. Changes take place. You may be ordered by a new Government or by some electrical undertaking to run electric poles on your land, and the cost of them, 7s. 6d., 5s. 6d., or 2s. 6d. people, may become a charge on your investment income. There are many things of that sort that can happen. It frequently occurs that you may have to sell some of your urban property and put the proceeds into your estate company so as to give yourself an investment income which will enable you to work the estate better. Whichever way you look at it, I think

these companies must have a certain amount of latitude in regard to changing land investments into money investments.
We had recently before this House a private Member's Bill relating to a local charity. The Charity Commissioners sought to sell some land that had been left to enable them to give blankets to the poor, and they desired to put it into money instead. That Bill was passed by this House. We want the same system in regard to an estate company so that you may be able to have a certain amount of investment income in your company. Our Amendments provide three alternatives for allowing a percentage of investment income in a company which shall not all be taxed for Surtax, I think the Chancellor of the Exchequer and the Attorney-General must know perfectly well that there are very few companies that are not bona-fide companies, and that many of them are spending the whole of their income and are making losses in developing their estates. That development is good for the countryside and for the people who live there. The English country estates are still our pride, but if the Government take millions of pounds out of them in taxation and do not allow the money to be put back into the land, because they are too severe on the ordinary bona-fide companies, it will be a great loss to the countryside.

4.34 p.m.

Mr. Benson: I am not quite sure whether the hon. and gallant Member for Newbury (Brigadier-General Brown) has not forgotten certain knowledge which he acquired when he was in the Army. I was under the impression that when the military contemplated an attack, the first thing they did was to co-ordinate their forces. The hon. and gallant Member and the hon. and learned Member for Ashford (Mr. Spens) have not coordinated their method of attack on this Clause. The hon. and learned Member for Ashford put up a plea for the poor struggling company: the company that was poverty-stricken. I am not sure how he can square that with the fact that this is a Clause dealing only with Surtax payers. The hon. and gallant Member takes a rather different line. He admitted that owing to incorporation a number of estates had been able to spend large sums of money in development. He said that that was owing to incorporation. The advantage of incorpora-


tion is that it enables the owners of an estate to avoid paying Surtax.

Brigadier-General Brown: Not if there is any profit to the company.

Mr Benson: But the profit does not depend upon incorporation. The hon. and gallant Member said that they were able, owing to having turned themselves into limited companies, to do these developments, and the only source of extra income that would arise from the fact that they had incorporated themselves was that they avoided payment of Surtax. Therefore, I can only assume that the developments arose from funds which had the estate not been incorporated would have gone to the Exchequer in Surtax.

Brigadier-General Brown: Brigadier-General Brown indicated dissent.

Mr. Benson: Certainly. That is the logical deduction. There are gradations of Surtax. The Surtax on the lower ranges of income is comparatively small. If, therefore, this development has occurred by the incorporation of the agricultural estate and the avoidance of Surtax, there are only two deductions to be made, (1) that it is a very large agricultural estate or, (2) that the whole of that agricultural estate paid very high rates of Surtax. Were it a question merely of a small struggling company, where perhaps one of the members of the company happened to be just over the Surtax level, there might be something to be said for the Amendment, although the amount by which he would be hit would be so small that it would not matter.
As the hon. and learned Member for Ashford said, large sums are involved, and that necessarily means large incomes of large estates. It is there where no hardship is involved. The Government's policy in this Clause is that certain reserves shall be allowed to agricultural estates because they are more or less in the position of running a business; but why should a landowner or a group of landowners who have incorporated their estates be allowed to add other forms of investment and hold parts of the income of that investment in reserve? I am not prepared to agree that reserves should be built up out of agricultural rents and profits which shall not attract tax. With regard to income which comes simply and solely as a result of investment, I see no

reason why that income should not attract tax. [Interruption.] He does not receive the income, but it is under his control.

Mr. Spens: Not necessarily.

Mr. Benson: Perhaps not necessarily, but even if it is not under his control he has the beneficial ownership. To say that you may save money out of income and add to your assets out of income, but if you do it in a certain way you avoid payment of Surtax, cuts at the whole basis and idea of Surtax, namely, that a man shall pay a differential rate according to the size of his income. I do not see why this question of incorporation should give any advantage to a person who desires for his own perfectly legitimate purpose to incorporate his estate or his investments. If the country requires savings, and it certainly does, and if certain savings are to be allowed to be accumulated without the payment of Surtax, the hon. and learned Member ought to be able to put by a certain amount of his fee per annum and say to the Government "I am. creating a reserve fund out of my fees; it is going into productive industry, and I am entitled to supply productive industry with capital just as is the owner who is a limited company and puts money to reserve. I am entitled to the same advantage and for the same reason."

Mr. Spens: I am not allowed to do that, but I am allowed to insure my life and to insure myself against sickness, and I can get a small reduction in respect of that for Income Tax and Surtax.

Mr. Benson: So could all the five members of the company. I am suggesting an advantage to the hon. and learned Member and why he should cast it aside I do not know. If savings are an advantage to the nation, I do not see why certain savings if they come within the ambit of a limited company should not attract tax, while the savings outside the ambit, which are put exactly to the same use, should attract tax. The hon. and learned Member made a moving plea for the poor Surtax payer. We have had that plea so often whenever taxation has been involved, and especially in regard to the marginal cases. What this Clause is getting at, and what I hope the Government will assist us to get at, is the large agricultural estate which has


been incorporated primarily for the purpose of the avoidance of Income Tax, Surtax and Death Duties.

4.42 p.m.

The Attorney-General (Sir Donald Somervell): My hon. and learned Friend the Member for Ashford (Mr. Spens) presented a precise and lucid explanation of the general intention of the Clause. The Clause is aimed at arrangements made in respect of income from investment and devices in connection with income from investment which have been put forward as justifying the non-distribution of investment income. It is because it was thought that that was not a really satisfactory position that this Clause has been introduced, the broad principle being that in respect of investment income, whatever you do with it, you should pay Surtax on it, although you have transferred your investment to a company more or less as if you were an individual. It is true that there are minor adjustments. You pay N.D.C., which you would not pay if you were an individual, and, as I stated last night, we propose to allow some reasonable expenses, which the individual would not have but he does not pay N.D.C. That is the broad principle of the Clause.
It was not desired or intended to apply the Clause to a company which is solely or mainly carrying on trading, or a company dealing solely with an estate and with the income from an estate. For that reason in Sub-section (3) it is stated:
The preceding provisions of this Section shall not apply to an investment company the whole of the actual income whereof from all sources is estate or trading income.
My hon. and learned Friend said, with some force, that although there is the letter of an intention, it would not, in fact, cover any actual estate company, or would be very unlikely to do so, because there would be practically no estate company which did not have some income other than estate income. You may have such a company where in its origin the sole asset transferred to it was the land, in the year before it had put by anything for contingencies and reserve. My hon. and learned Friend was quite right in saying that such a case would be very exceptional, if it existed, and that broadly speaking, there would be no estate company the income of which was solely estate income. I think that is a very forcible point.
Before dealing with the proposals that have been made, I should like to remove a further misapprehension that may exist. My hon. and learned Friend pointed out, quite rightly, that this Clause affects only Surtax, and not Income Tax. I would point out also that in the case of estate companies which have some income from investments, if they distribute an amount equal to or exceeding the income from their investments, they are not hit by this Clause, because they have, by that act, distributed the whole of their Investment income, and one proviso to the Clause states that income distributed shall be deemed in the first instance to be income on the investments. Some hon. Members who have studied the Clause may not have appreciated that fact. In considering the proposals, it is necessary to guard against an estate being used to mask—I do not use the word in an offensive sense —what is in substance an investment company. Suppose, for instance, that a man has a small estate and large investments, he might transfer them both to the company. The purposes of the company, as they appeared from the articles and so forth, would be the management of the estate, but the quantity of the investments transferred would be far more than the estate needed for any estate purpose. In fact, it would really be a combined company which was a company, in the main part, merely to hold investments, and in a smaller part, to hold an estate. I am sure that my hon. Friends will agree with me that it is necessary to see that there are provisions to safeguard that sort of device.
I come now to the three proposals that have been put forward, and on which I take it we are having a general discussion. The first one attempts to make the words in Sub-section (3) have a real meaning by applying a percentage test and saying that if an estate company has so much estate income, then if its investment income is only 25 per cent, of that amount, it shall be treated as an estate company for the purposes of this Clause and left outside the Clause altogether. That does not seem to me to be a good way of meeting the point, if it is a point which should be met, for the following reason. It would assist an estate company which did not need assistance, and it would not help an estate company on which the provisions of this Clause might in certain years bear hardly. If there


was a company with a flourishing estate, bringing in a large amount of estate income, then 25 per cent. investment income would be a large amount, and a flourishing estate would need so much the less in investment income. On the other hand, in the case referred to by my hon. and gallant Friend the Member for New-bury (Brigadier-General Brown), where the estate was actually making a loss, it would get no benefit by this proposal, because 25 per cent. of its estate income would be nil. Therefore, the very case which I think would appeal to the Committee most as being one where something should be done to meet the position when it existed, would not be assisted in any way by the proposal.
I will now deal with the third proposal, which takes the form of an Amendment to an Amendment that we shall discuss later, and states that a company which is run wholly or mainly for the management of an agricultural estate shall be exempted altogether. The difficulty about this proposal, I think, is that it would be difficult to apply in practice. One cannot merely accept the words used in the memoranda and articles; one has to go into the motives. If one sought to follow this proposal, one would either do too much or too little. One would have to draw the definition so narrowly as to cut out possibly a legitimate case where investment income from outside had been transferred in order that losses might be made up. One could not have a form of words which would open the door too wide and let in a company which said that it was managing an agricultural estate, but in fact had very large investments which had been transferred for other purposes.
Therefore, I come to the second proposal which, as was said both by my hon. and learned Friend and by my hon. and gallant Friend, is designed to meet cases where, in a particular year, revenue is lost on the running of the estate; that is to say, more money is spent on the maintenance, repairs and so on of the estate, than comes in. Let me give an instance of the position as the Clause is at present. An estate company makes a loss of £500. There is an investment income of £1,500, of which £500 has to go to make up the deficit in the estate income. Under the Clause as it is, the whole of the £1,500 would be deemed to be distributed, although in fact there

would be only £1,000 available for distribution. That is not a case of building up reserves for capital expenditure and development, and the creation of new estate enterprises; it is simply a case in which, on the actual revenue account for the year, there is a loss on the running of the estate.
It seems to me that that is a case which should be met. To do so would not, in my view, introduce any new principle into the Clause, but would simply carry out the general intention of Subsection (3) and meet a case which, I think, hon. Members in all parts of the Committee feel is one that ought to be met. The words of the Amendment dealing with the matter are words which I cannot accept. I think they go beyond the intention expressed in the speeches of my hon. Friends, and in any case, I am not sure that they represent the right way of dealing with the matter; but I hope that my hon. Friends will accept my assurance that I feel this is a point which should be met, that words should be introduced to permit a company to set against investment income a revenue loss on the estate, and that I will consider what is the best way of achieving that object and put down an Amendment on the Report stage. Having had these assurances, I hope my hon. and learned Friend will withdraw the Amendment.

4.55 p.m.

Mr. Pethick-Lawrence: No doubt the hon. and learned Member for Ashford (Mr. Spens) will withdraw the Amendment, in view of what the Attorney-General has said, but before that is done, I want to put one question to the Attorney-General and to make a statement on the position of myself and my hon. Friends with regard to this matter. I want to ask what precisely would be the position of a private individual faced with the circumstances which the Attorney-General has been describing with regard to an estate company. If I am correct in my interpretation of the law, a person cannot write off, for Income Tax purposes, a loss under Schedule A against a profit under Schedule D. Therefore, I think I am right in saying that a person has to pay Income Tax on the full income under one Schedule, even though he has made a loss under another Schedule, and cannot write off one against another. I am not


sure of the facts with regard to Surtax. Is it correct that an individual faced with this position cannot, for Surtax purposes, write off a loss under one Schedule against a profit under another Schedule? My impression is that he cannot do it. Perhaps the Attorney-General will correct me if I am wrong.
Certainly, it has always seemed to me to be unjust that this should not be so. At the same time, if it is not so in the case of a private individual, I am not clear why it should be so in the case of this particular form of company. It may easily happen that a private individual is in such a position that he is likely to make a loss on one particular part of his property for some years, and if the Attorney-General is going to give this concession, surely it will open the door to a private individual to escape paying Surtax. It may be legitimate that he should escape it, but that is a matter I am not discussing now. As the law is at present, he cannot escape it, and if the Attorney-General intends to put down an Amendment on the lines he has indicated, it seems to me that, by means of a device, a private individual might succeed in doing what he is not allowed to do now. If the law is wrong—and I am not sure that it is not wrong—in the case of a private individual, I think it is right that it should be changed. I do not see why it should be changed in this particular case if it is not changed in general. As to the position of my hon. Friends and myself, of course if we agree that the Amendment should be withdrawn, if the hon. and learned Member desires so to do, it does not commit us in any way to approve any Amendment which the Attorney-General may move on the Report stage.

4.59 P.m.

Mr. Benson: I should like to ask how a person achieves a loss under Schedule A? What is to be the criterion of loss in relation to Schedule A? Schedule A is an assessment of a peculiar kind. There are certain allowances made which depend upon the type of propery, and there is no tax payable, and no loss that can be shown, if the property is empty. It might happen that on the quinquennial average a person could show that he received a minus quantity over five years, but I am rather puzzled as to how a

company would, from the accountancy point of view, show a loss under Schedule A.

5.0 p.m.

The Attorney-General: I will deal first with the point put by the right hon. Gentleman. There are certain provisions by which a loss under one schedule can be set off against the assessment to another. For example, a farming loss can be set off by an individual against his general income. There, are certain other provisions under Section 34, but in the case of an individual it is true to say that the loss that we are dealing with here could not be set off by him for Income Tax or Surtax purposes against the assessments on his other resources. To that extent the company gets an advantageous position. All I say, and all that I think the right hon. Gentleman would want me to say, at this moment on that matter is that, of course, there are, and always have been, certain tax advantages which flow from incorporation. Long before we ever heard of tax evasion in the form in which some individuals have done it, incorporation gave certain tax advantages, and this concession will be one of them. Whether the system is logical, or whether it could be altered in one way or another, is not a matter that we can go into now. The hon. Member for Chesterfield (Mr. Benson) did not know how a loss could be made under Schedule A.

Mr. Benson: No, I did not say that. I do not think many of them do, but I was puzzled about this, how you showed a loss under Schedule A and how are you going to set a quinquennial balance against any Surtax.

The Attorney-General: I understand the question. The admission that the hon. Member has just made will be noted by my hon. Friends behind me if there is any later discussion. The loss that we are concerned with is not a money loss. When a man has spent more in authorised outgoings on management, insurance, repairs, improvements to cottages and farmhouses, and so on, then he has made a loss and that is the loss that we are talking about. It is an actual income loss.

Amendment, by leave, withdrawn.

Sir Herbert Williams: I beg to move, in page 12, line 40, at the end, to insert:
(iii) if and so long as such a company is precluded by law from paying a dividend to the members of the company by reason of the value of the assets of the company being less than the par value of the issued share and loan capital the actual income from all sources of the company shall be treated as a whole and shall be deemed to be entirely attributable to estate or trading income.
The purpose of the Amendment is to deal with what I am advised is a certain, though not perhaps a large, number of cases. It is not always the case that a private company is in fact precluded from distributing a dividend in the circumstances contemplated in this paragraph. On the other hand, there are companies, I am advised, which are in that position, and it would be a logical absurdity if this situation arose. The law says to a company, "If you distribute a dividend you commit a crime." If, at the same time, it says, "We have to assume that you have distributed not only a dividend, but what may be regarded as profits from one point of view, though they are offset by other things regarded as losses," that they should then presume that the dividend which it is illegal to distribute has, in fact, been distributed, seems a manifest absurdity. I hope the Attorney-General will not deal with it on the line which it has been suggested in some quarters it should be dealt with, namely, that such companies do not exist, because my information is that there are such companies and, if there are, I do not think they should be subjected to the kind of injustice that I have described.

5.6 p.m.

The Attorney-General: I am not going to say that such companies do not exist if my hon. Friend says they do, but I was at a loss to understand how such a state of affairs could arise, because there is no general principle of law preventing a company from distributing a dividend because the value of its assets is less than the par value of the issued shares. The question whether a dividend can or cannot be declared is simply a question whether there are profits out of which it can be declared. One could not, of course, allow a company by its own act to preclude itself from declaring a dividend within some such provision as this. All I can say is that I do not appreciate how the position could arise. If my hon.

Friend could give us rather more detail as to how it could arise I will certainly look into it and see whether there is a point that could be met. I cannot carry it further at the moment.

5.8 p.m.

Sir Alfred Beit: My hon. Friend is quite right in saying that such companies exist. I am, through an executorship, connected with such a one. Under the definition given in the Companies Act there is a considerable difference between investment companies and finance companies. I am rather anxious to know whether this differentiation, which is very marked when one reads the articles of association, is to be maintained, and whether a company carrying on a trade includes a finance company. It seems to me that the object behind the Amendment is to protect a finance company which may have had a loss from having to pay, through its members, Surtax on dividends which in point of fact have not been distributed.

Sir H. Williams: I did not know that I was going to have the luck that my hon. Friend would be in a position to declare that he, in fact, through a trusteeship, is a director of such a company as I have in mind. In view of the Attorney-General's undertaking, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.10 p.m.

The Attorney-General: I beg to move, in page 13, line 5, at the end, to insert:
(6) The preceding provisions of this Section shall not apply in the case of any company if the Special Commissioners are satisfied that the company exists wholly or mainly for the purpose of carrying on a trade or for the purpose of co-ordinating the administration of a group of two or more companies each of which is under its control and exists wholly or mainly for the purpose of carrying on a trade.
It was never intended to bring within the scope of this Clause companies incorporated and carried on for the purpose of trading, and that is one of the matters dealt with in the Amendment. It has also been brought to our notice that the wording of the Clause, with previous definitions of investment companies, would cover the case of a holding company which exists for the purpose of co-ordinating the administration of a group of two or more trading companies. Neither class of company of that kind was within our


intention in drafting the Clause, and therefore we desire to omit them. The case of the holding company is quite obvious. With regard to the trading company, the matter arose in this way. Investment companies are defined under earlier Acts as companies whose income is mainly income of a character which, if an individual got it, would be unearned income. A trading company may have reserves and obtain some income from them, but the bulk of its profits are its trading profits. If it fell on bad times and made no trading profits, its income from investment would be the sole source of income, and it would in fact, only by an accident fall within the definition of an investment company for tax evasion purposes. No one desired or intended that, and these words are put down in order to omit these two cases which we do not desire to bring within the scope of the Clause. An hon. Member on the last Amendment raised the question of a finance company. I understand he meant a company actually trading in investments as distinct from a company holding investments. That would be excluded from the purview of the Clause.

Mr. Keeling: I should like to ask my right hon. and learned Friend whether this Sub-section would cover the case of a patent-holding company. A patent-holding company does not carry on trade in the ordinary sense. It may get the whole of its revenue from royalties. Such a company is formed for convenience, and not in the least for tax evasion, to carry on a bona fide business and, incidentally, if it gets royalties from abroad it is adding to our invisible exports. I do not think it can be intended that it should be hit by the Clause.

5.14 P.m.

Lord Apsley: We have not heard from the Attorney-General how it is that the average agricultural estate is assessed as an investment and not a trading company. No one will pretend that the average trading company has not got investments from which it could meet losses in a bad year. It often happens that the senior partner of a trading company finds it necessary to draw money from his own private resources and put it into the company in order to tide over bad days. That is the normal way of running such a company. I gather that this Clause has been drawn by the Chan-

cellor of the Exchequer in order to meet hard cases of that kind. I cannot understand, on the Attorney-General's definition of an investment company, how it can be argued that an agricultural estate company is an investment company. Surely it is carrying on a trade or business and its main source of income is that business. The hon. Member for Chesterfield (Mr. Benson) has already raised a point about assessments under Schedule A. That is dealt with in another Amendment and I would not be in order in going into it deeply at this stage, but I would mention that originally Schedule A was drawn to deal with all income from land. Since that time things have changed and most agricultural estates now have certain sources of income which are not assessed under Schedule A. There are such things as quarries, timber, way-leaves and so forth, income from which is assessed under Schedule D.

The Deputy-Chairman: That is going rather wide of the Amendment which is under discussion. We are not discussing the Clause itself or subsequent Amendments to it.

Lord Apsley: I am only raising the question of definition and the difference between a trading company and an investment company, and I wanted an explanation of why it is that, in the terms of the Attorney-General's definition, an agricultural estate company is regarded as an investment company and not as a trading company.

5.18 p.m.

The Attorney-General: As to the case of a patent holding company, the answer is that the Amendment would include a patent holding company, if, to use the technical phrase, they "serviced" their patents, that is to say, looked after the marking of machinery or so forth and whether, in fact, they worked under the patents. If however, they merely held the patents as a form of property I think they would not come within the Amendment, but if my hon. Friend who raised the point will give me further details, I shall be glad to do my best to tell him what the position is in regard to any particular company. On the question raised by my Noble Friend the Member for Central Bristol (Lord Apsley), I would point out that in the earlier Acts an investment company was defined as a company whose income was mainly income


which, in the case of an individual, would be unearned income. As far as Schedule A income is concerned that is unearned income where it comes to an individual, and that is why, for statutory purposes, however much one may regard land-owning as a business, these companies have to be dealt with differently, and that is why this Amendment is necessary in respect of trading companies, which is not necessary in respect of agricultural estate companies.

Amendment agreed to.

5.20 p.m.

Mr. Spens: I beg to move, in page 13, line 8, after "B," to insert:
or which would have been so chargeable if Section twenty-eight of the Finance Act, 1926, and Section twenty-one of the Finance Act, 3934, had not been passed and income arising from the ownership or occupation of property which is chargeable to Income Tax under Case VI of Schedule D.
Perhaps I may be permitted to refer to the Amendment which follows this on the Paper—in line 13, page 10, at end, to insert:
and income which is shown to the satisfaction of the Special Commissioners to be de-lived from the proceeds of assets which produced estate or trading income and have been acquired by the Government or any local authority or statutory undertaking for a purpose for which authority for the compulsory acquisition of the same has been or could have been obtained
—which raises very much the same point. The Committee will realise that the definition of an estate company depends to a large extent on the provisions of Subsection (6) of Clause 14 as to how the company's income is chargeable to Income Tax. "Estate or trading income" is defined as income which is chargeable for Income Tax under Schedules A or B. As a result of recent legislation, Section 28 of the Finance Act of 19,26 has given directions that a large variety of income which is derived from land and which used to be assessed under Schedule A shall now be assessed under Case VI of Schedule D, in the same way as Section 21 of the Finance Act of 1924 has also directed that certain amounts shall be assessed under Schedule D. But there are, and always have been, certain odds and ends of income which have never come under either Schedule A or Schedule D, such as receipts from furnished lettings, payments for rights of way or things of that sort. If therefore, the definition—depending on the Schedule

under which the ordinary average estate income comes to be assessed—is accurately set out in Sub-section (6) we shall get into difficulties over the question of what is an estate company and what is not.
I have here a detailed list of the various things which have been shifted by recent legislation from one Schedule to another and I propose to hand it to my right hon. and learned Friend and to ask him to consider it in relation to these two Amendments. Whether we have succeeded in making it right or not in these Amendments I am not certain, but I am certain that Sub-section (6) as now worded is too narrow and that some words are required which will allow a company to be regarded as an estate company, while receiving those odds and ends of income from land which happen to be assessed under one or other of the cases of Schedule D. The second Amendment is slightly different. It deals with cases where, for instance, land has had to be realised compulsorily and the proceeds have had to go into stocks. The simplest case is that of tithe, which is now a Government stock, and there are other matters of that sort. There is included in the income of a great number of these companies small portions of stock of that description, which they have had to acquire, whether they want it or not.

5.24 p.m.

Mr. Benson: I hope the Government will resist both these Amendments. I oppose the first Amendment because, personally, I thoroughly dislike a large number of these various odds and ends to which the hon. and learned Member has referred. He is very innocent in his suggestion about such things as furnished lettings. There are also such things as tolls on roads and bridges and a large number of irritating ancient manorial rights, and out of sheer personal enmity to charges of that kind I hope that no concession will be made in respect of them. With regard to the second Amendment, it is simply a proposal to make a concession on the proceeds received from the compulsory purchase of land, and it seems to me an outrageous proposal. Landowners are only too pleased to have compulsory purchase orders served upon them, because they know they will get thundering good prices from the local authority or the Government as the case


may be, and why we should earmark the money received from these transactions in the way proposed by the Amendment, is beyond my comprehension.

5.25 p.m.

The Attorney-General: The purpose of this Amendment is to arrive at a reasonable definition of an estate company. My hon. and learned Friend who moved it has two horses in his stable. One is a good horse but I do not think that the other is in sound and warrantable condition. As regards the first, I am obliged to him for drawing attention to this matter. If the hon. Member for Chesterfield (Mr. Benson) will rid his mind for a moment of his dislike of those relics of medievalism which form a picturesque, though as he thinks an irritating feature of life in some parts of the country, he will see that all this Amendment is doing is trying to get at a fair definition of income which comes from land or is associated with land. Judged from that aspect I think it is fair to say that the additional matters which are brought in by this Amendment, are matters which should be included within the definition of estate income. If the hon. Member will reflect I think he will see that what he has in mind is very much what I have in mind, namely, to see that these companies are not loaded with investment income which has nothing to do with the land. These matters all arise out of the land and I think that this proposal is in the direction of improving the definition. The actual words will require examination because these things have been scattered about the various Schedules for machinery purposes, but in principle we agree that income arising from or connected with land should be included within the definition of estate income.
As regards my hon. and learned Friend's second horse, that is to say his proposal about compulsory purchase, I am bound to say that I think there are objections to it. If one takes a limited case, suppose that an estate is transferred to a company and is then bought in toto, compulsorily or otherwise, the company would cease to be a land-owning company and would become an investment company. Though I appreciate that there may be cases where something on these lines might be desirable, I think it would be difficult to justify, in principle, a provision of this kind. I hope, therefore, that

my hon. Friends will appreciate that difficulty and will not press the second Amendment. I think the first Amendment is reasonable and I will undertake that my right hon. Friend will seek to cover the point substantially by putting down suitable words on the Report stage.

5.29 p.m.

Lord Apsley: May I put in a word for the second horse? I do not know whether what I have to say will improve its chances, but I would like the Attorney General to consider the fact that there-are cases—many arising at the present time—in which there will be great hardship. There is an enormous expenditure at present on various expansion schemes. A great many landowners are having land taken from them compulsorily for use as aerodromes. The acquisition of land for an aerodrome may ruin five or six farms. It is true that the value of the land maybe put up by these schemes and that the owner may receive a payment slightly higher than its agricultural value, but whatever is gained in that respect, is not to be compared with the eventual loss caused by the taking over of those farms. Furthermore, most landowners and estate companies know that these expansion schemes will not go on for ever. Some day or other, whether there is a war or whether there is a pact, these aerodromes will have to be dismantled and abandoned and the land will be left in. a derelict condition. It will be very hard indeed to get it back to ordinary agricultural use and quite impossible to develop it for any other scheme. Therefore, I suggest that the point made by my hon. and learned Friend is one that should be carefully considered.

Mr. Spens: Having regard to what my right hon. and learned Friend said about the first Amendment, I ask leave to withdraw it. With regard to the second Amendment, I will only say that I hope he will consider that matter again, but I do not propose to press it either.

Amendment, by leave, withdrawn.

5.31 p.m.

Captain Cazalet: I beg to move, in page 13, line 13, to leave out "1938–39," and to insert "1939–40."
This again introduces the question of retrospective legislation. I quite understand that individuals who pay Surtax pay it on the previous year's income and


that it is up to those individuals to set aside in the current year such sums as may be required on 1st January in the following year to pay their Surtax. It is true that they very seldom do so, but that is their folly as well as their misfortune. It is, however, rather different in the case of these estate companies. After all, the Attorney-General will appreciate that individuals have known that they have got to make these payments on 1st January in the following year, and they therefore know what sum of money they have to set aside, but in respect of these estate companies, if this Clause comes into operation as it is, these companies, which have quite legally, it may be, spent some of their investment income in keeping up their estates or may have set some of it against what otherwise would have been a greater loss—at any rate, the money has been spent in the countryside on the improvement and maintenance of the estates—these companies, or the individual shareholders in them, may be called upon to pay Surtax on money which has been spent, and perfectly legally spent, in the land on their estates. I therefore ask the Attorney-General to consider whether he could not insert "1939–40" in place of "1938–39," because then these companies will know, by this Clause, that they have to set aside, or may have to set aside, a certain proportion of their investment income to pay Surtax next year. If I may mention the following Amendment—in page 13, line 13, to leave out from "years" to the end of the Clause—we put that down to try and get an interpretation of what appears to us to be a very complicated Sub-section, and I shall be glad if the Attorney-General can give us any information on that Sub-section.

5.34 p.m.

Mr. Hely-Hutchinson: I wish to ask my right hon. and learned Friend a question with regard to this rather complicated Sub-section, and I am not sure whether I ought to raise it here, or on the next Amendment, or on the question that the Clause stand part. I am not quite sure whether, as a result of this Sub-section, the Government are going to collect Surtax in one year on income which really belongs to two years. While it may be fair that Surtax should be collected on the income of each of those two years, nevertheless, if it is collected all in one year, it lumps two assessments together,

and the rate of Surtax is therefore very much higher. If I should have raised that point at another stage, I will not press it.

5.35 p.m.

The Attorney-General: To deal first with the Amendment, as my hon. and gallant Friend said, Surtax paid on Ist January next year is the Surtax which is technically that for 1938–39 and based on that Income Tax income. The rate is fixed by this Finance Bill, and it has been the practice of successive Finance Bills that both the rate and other provisions dealing with the Surtax to be paid on any particular 1st January are dealt with by the Finance Bill immediately preceding that payment. Though I quite agree that my hon. and gallant Friend has made a distriction between the individual who knows he has to pay and the cases which may arise under this Clause, it is true to say that really nobody knows, until the Chancellor makes his Budget statement, how much the Revenue will take in Surtax on the following 1st January, although it is on a previous assessment. I do not think that can be regarded as retrospective legislation; it is rather retrospective assessment. I hope the hon. and gallant Member will not press his Amendment. I will ask him to bear in mind that there would have been a very strong case if my right hon. Friend had not agreed to admit as a principle reasonable management expenses—and we are considering that matter again before the Report stage, but that does not apply to this Amendment and, of course, we also extended the definition of estate companies. I therefore think the points which have been admitted go a long way to meet the hardships to which my hon. and gallant Friend drew attention.
With regard to my hon. Friend the Member for Hastings (Mr. Hely-Hutchinson), he asked, May you not be getting more than one year's income taxed in one year? It is perfectly true that that may result, but under the existing system dealing with these companies the Commissioners can take the year of accounting of a company or the year of assessment from April to April. So far as this Clause is concerned, after this Bill becomes an Act it will always be April to April. You might, therefore, get a gap of income, which I do not think any-


body desires, but there is a provision in the Schedule to the original Act which enables the Commissioners, broadly speaking, to spread the income over more than one year. You sometimes get the position, not under these Sections at all, but where a company for its own purposes changes its accounting period, where you may get two accounting periods in one year. There is a similar provision there giving the Commissioners discretion so far as possible to spread out the tax, and it may be very important for the purpose of the rate, so as not to inflict undue hardship.

5.40 p.m.

Sir H. Williams: In effect, these assessments have already been made, and, therefore, I do not think my right hon. and learned Friend was quite right. It is true that the notice of assessment has not formally been served by the Commissioners on the taxpayer, but the assessment was really made last June, because every taxpayer is required in these days to make a complete statement of his income from all sources, and it is on the basis of that document that the Special Commissioners make the assessment for Surtax. Therefore, here is an assessment which is already 12 months old, and it is now proposed to be altered. That really is not changing the rate of tax. We know that we do that every year, but this is altering the rules of the game after the match is started. The assessment has been completed, and I think that is an aspect to which the Attorney-General did not fully direct his attention.

5.41 p.m.

Captain Cazalet: I understand from what the Attorney-General has said that he was sympathetic to my point, but this is not a question of an increase in the rate of Surtax. This is really a question of the levying of Surtax on income which was previously legally exempt altogether from Surtax. However, in view of what the Attorney-General has said, that he will reconsider the whole matter of management expenses and so on, I am prepared to ask leave to withdraw my Amendment now, although I hope the Attorney-General, who has admitted that there is a real point of grievance and difficulty here, will consider it again before the Report stage.

Amendment, by leave, withdrawn.

Mr. Dodd: I beg to move, in page 13, line 29, at the end, to add:
Provided that if the Special Commissioners are satisfied that there has been no substantial avoidance of Surtax they may certify the facts to the Commissioners of Inland Revenue, and if those Commissioners do not lodge an objection within three months from the date of such certificate no further action shall be taken under this Section.
Since we adopted the Chancellor's Amendment a few minutes ago, the wording of this Amendment will not perhaps recommend itself to the Committee, but I should like my right hon. and learned Friend to consider one or two aspects of my Amendment and its effect on the Amendment which has been accepted. I think the Committee as a whole accepts the principle that there should be as few loopholes as possible as regards the payment of Surtax. Nevertheless, while the Government Amendment exempts companies that are formed for the purpose of co-ordinating trading, I have no doubt there is a considerable number of companies which exist, quite legally, for other perfectly good reasons and not for the purpose of the avoidance of tax; and I think it is essential that the Clause should be drawn as widely as possible, so as to allow a right of appeal, for the Special Commissioners to decide whether a case for exemption is or is not made, and for them to be able to make a recommendation accordingly to the Commissioners of Inland Revenue. As I read the Clause now, it means that the basis of assessment is to be on the gross income, and that raises, I think, the possibility of double taxation in certain cases where charges are at present allowed in some investment companies to be offset for specific reasons. Duplication may not arise, but there is a possibility of its arising, and I think the Clause should allow for cases of that type that do arise to be dealt with.
I am not sure whether the right of appeal is covered under the Clause as already amended, and whether there should not be a definite date put down to limit the period within which an assessment can be made. In other words, if these companies are operating continuously over a period of time, it is only right to say that the people operating them should know whether or not they are liable to tax, and a date should be put in limiting the period within which


the assessment can be levied or made. While I do not wish to press the exact wording of the Amendment—I propose later to ask leave to withdraw it—I would like my right hon. and learned Friend to consider whether the Government Amendment which we have adopted could not be extended to cover something wider than companies formed for the purpose of carrying on trade or co-ordinating companies. I think in operation we shall find that there is a considerable number of other cases than that covered by the Chancellor's amendment which ought to be brought in, and it is only right and fair that there should be justice done all round rather than that we should inflict hardships on any particular section of the community, whether they are wealthy or not.

Mr. Watkins: May I call the attention of the hon. Member to a word in his Amendment which strikes me as being extraordinary and that is the word "substantial." Does the hon. Member consider that a certain amount of tax avoidance is permissible but that if it reaches large proportions the law should be put into operation?

Mr. Dodd: No, I appreciate the hon. Member's point. Perhaps it is not too good a word in the circumstances. The position really is that we shall have companies formed part of whose duty will be trading or co-ordinating various company activities and the other part will be purely of an investment character. "Substantial" is not perhaps the best choice of word and it could give rise to a considerable amount of discussion, but the word itself is not of essential importance. It is the principle that is important.

5.47 p.m.

Sir H. Williams: I apologise, Colonel Clifton Brown, for the fact that when you called the Amendment on the same subject which stands in my name—In line 5, at the end, to add:
or if the Special Commissioners are satisfied—

(1)that the company was not incorporated and does not exist for, and
(2)that the business of the company has not been and is not being carried on for the purpose of diminishing or avoiding the liability to Surtax of any member of the company."

I was beyond the Bar of the House, owing to having received a green card, and could not rise in my place in time. That Amendment agrees in principle with the one we are discussing, and I am inclined to think that the drafting of my Amendment is better and, further, that it would come in at the appropriate place, namely, as an addition to the Chancellor's new Sub-section (6), which is the exemption Sub-section. It has already been indicated that there are companies which could be drawn into this net which are not doing anything improper or seeking to avoid their legitimate share of taxation. If there are such cases, and I am advised that there are, this proposal does not automatically exempt them, because they have to satisfy the Commissioners that the conditions specified in paragraphs (1) and (2) of my Amendment are as they are set forth. Having regard to the experience of the Commissioners in these matters I think those are tests which are reasonable tests and ones to which the Commissioners could quite well apply their minds in coming to a decision. I hope, therefore, the Attorney-General will be in a position to indicate that there is a point to be met and that the method of meeting it may be on the lines of my Amendment.

5.49 p.m.

The Attorney-General: Both these Amendments introduce, though in slightly differing forms, what has been described as a motive test. In the Amendment of my hon. Friend the Member for South Croydon (Sir H. Williams) the motive is clear on the face of it, but as regards the Amendment before us there is the difficulty about the word "substantial," which has been appreciated in all quarters of the Committee. I think both Amendments are based upon a misunderstanding of the general lines of this Clause and how to make it into a workable Clause. The general idea is that if we find income from investments is being held up by a one-man company, Surtax shall be paid in respect of that income by those to whom it can be apportioned under the earlier Acts. In that way the individual who has formed one of these investment companies will make substantially the same contribution to our national needs as the individual who holds his investments and has not transferred them to a company. When they have been transferred for the purpose of avoiding Sur-


tax it is irrelevant whether there is substantial avoidance of Surtax or not. I quite agree that there are many companies to which investments have been transferred for some quite other purposes. In some cases the only motive was a right motive, having nothing to do with the question of Surtax liability, although there may be a diminished tax liability, and I have done my best to meet that situation by making certain conditions as to the distribution. But I would ask the Committee not to import a test of motive into this Clause.
The way to deal with the question is to meet legitimate cases in the way I have sought to meet them, and not by introducing a motive test. It would be inappropriate here and would be very difficult to work. If a man comes forward and says, "I did not form my company for the purpose of avoiding or diminishing liability to Surtax; though it is true that I have avoided it to some extent, that was not my purpose," it is impossible to dispute his statement. It is a most difficult form of test to work. It has been inserted in some cases where it is necessary, but I do not believe it to be necessary here, and I hope the hon. Member will not press his Amendment.

Mr. Dodd: Could the right hon. and learned Gentleman answer the point I raised as to the date?

The Attorney-General: I do not think that point arises, because under this Clause the direction is automatic. If this Clause does apply to certain incomes the money is automatically deemed to have been distributed. We do not have the problem which arose under the old Acts when no distribution was deemed to have taken place unless the Commissioners directed that it was to be regarded as having been distributed. This is an automatic distribution.

Mr. Dodd: My right hon. and learned Friend has gone quite a long way to meet me, and though I had hoped he would be able to go a little further, in view of what he has said I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

CLAUSE 15.—(Extended powers as to apportionment of income of investment companies.)

5.53 p.m.

Mr. Benson: I beg to move, in page 13, line 30, to leave out "investment company," and to insert:
company to which the provisions of Section twenty-one of the Finance Act, 1922, apply.
This being an entirely different Clause from the last one, I have every hope that I shall get the word "investment" deleted. The purpose of the Clause is to deal with a very obnoxious form of tax evasion. In order to avoid tax a member of a company arranges that his shares shall appear to belong to somebody else, though he may in some curious and ill-defined way be able to obtain those assets at some time or another. By this Clause the Government suggest that the Commissioners can look beyond the apparent facts and can say, "Member A is not the real owner, irrespective of what appears on the book, and irrespective of what the legal position appears to be, and we are going to attach that income to the real owner, and it shall attract Surtax." For some reason or other the Government propose to limit this very valuable power to their dealings with investment companies, and I see no particular reason why it should be limited to them. If the same tricky work is going on in a trading company I see no reason why the Commissioners should not have the same powers as in the case of an investment company. If the tax avoidance is not going on in a trading company this Clause would not operate even if the Amendment were adopted. It may be that the Attorney-General will reply that this tax avoidance does not happen in trading companies. Perhaps it does not at the moment, but the strong complaint we have against the Treasury is that they are always behind the times. They never stop a hole until it is being widely used, and here is a potential hole which we can stop up, not with complicated legislation but by simply leaving one word out of a Clause. It will impose no hardship upon any company.

5.57 p.m.

The Attorney-General: The hon. Member asked why, if the same tricky work is going on among trading companies, this very drastic Clause should not be applied to them. The answer is that it is not going on. As may be shown when


we discuss a later Amendment, this Clause confers very exceptional powers upon the Special Commissioners, powers which the Committee would require should be justified by very special circumstances before they would agree to them. Evidences of the device with which we are dealing here have been found solely among investment companies. As the hon. Member knows, there are various other provisions in the Finance Acts of the last two or three years which apply only to investment companies, for the reason that trading companies have not sought to evade the intentions of Parliament in such a way as to make these special provisions necessary in their case; and that distinction having been already drawn, I think it would be wrong to extend this very drastic Clause to cover classes of companies which are easily distinguishable, and have already been distinguished in previous legislation, when it has been shown that there is no necessity for the exceptional powers to apply to them. The hon. Member and the Committee can rest assured that if these devices do emerge in other quarters we shall ask Parliament to allow this Clause, which we shall have ready to hand, to be extended; but I do not think that is likely, for various reasons which I will not go into now. All hon. Members who are interested in this subject know that the sort of device we have in mind is much more difficult to apply in the case of a company which is carrying on active trade and distributing a certain amount of its income in dividends than it is in an investment company, and we think it right to restrict these very special powers in the way I have indicated. I therefore hope that the hon. Gentleman will not press the Amendment.

Mr. Benson: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.0 p.m.

Mr. Spens: I beg to move, in page 13, line 34, to leave out "or is likely to be, able," and to insert "in law or equity entitled."
I tell my right hon. and learned Friend frankly that the Amendment which I am moving would torpedo his Clause if it were carried. The hon. Member for Chesterfield (Mr. Benson) referred to a situation which arises in connection with

these companies, and he used the expression that the revenue should be able to get behind what appeared to be the legal situation. The whole object of the Clause is, for the first time in our legislation, to allow the Government to empower a body of men, the Special Commissioners, whom we all trust up to the hilt, to go, on the application of the Government, right beyond not only what appears to be the legal position but what is in fact the legal position. If the Committee will study the words of Sub-section (1) they will notice that the person who may be got at is:
any person who is … or is likely to be, able to secure that income or assets, whether present or future, of the company will be applied either directly or indirectly for his benefit.
When you read Sub-section (3) you find these words:
For the purposes of this Section, a person shall be deemed to be able to secure that income or assets will be applied for his benefit if he is in fact able so to do by any means whatsoever, whether he has any rights at law or in equity in that behalf or not.
Then it goes on to the particular instance.
For the first time we are authorising the Executive to go before a tribunal in this country and to say: "It is true that in law A is the owner of this income and that in equity B is its beneficial owner, but there is somebody else, man or woman D, who by some means can get part of that income out of A or B. He or she has no legal or equitable right to it but that person can get the whole or part of that income. Therefore, we, the Revenue, ask you to say that the third person is the owner of that income although he has no sort of legal or equitable right to it." My right hon. and learned Friend is quite right in saying that one has to go to enormous lengths to protect the Revenue and to get these practices stopped, but to give such power to a tribunal as that for which my right hon. and learned Friend is asking is to go far beyond anything that we have ever done in this House before in order to protect the Revenue. My right hon. and learned Friend said that the Clause could be very easily applied to prevent these devices; of course you can apply it to every sort and kind of company. You could say in certain circumstances that any person within the highest category of Surtax was likely to be able to get somebody else's income. If the Committee are to go beyond the legal and equitable rights of persons they must


do so with a full knowledge of the extreme step which they are taking and of the enormous discretion which they are giving to a body of men.
It is right to point out that these powers may be used by the Special Commissioners only if they think right. Discretion is left with them. From that body of five or six human beings there is an appeal to a court of referees and no further, as to questions of fact. In the last three years we have authorised the most enormous steps to be taken by the Executive to protect the Revenue. Much as we trust the Special Commissioners and those who act for the Crown in these matters, this seems a most tremendous power to give to any tribunal in this country. It may be necessary to do what is provided here, but the Committee must make up their mind whether to allow to go into the Finance Bill a Clause for the protection of the Revenue which goes to the length to which this Clause goes, or whether to raise the main issue.
My Amendment would confine the rights of the Commissioners to assets where the legal owner of the income was so-and-so but somebody else had a right in equity to get that income and therefore this other person could be assessed for it. To go beyond legal and equitable relationships in this country seems to be taking a step forward about which the Committee should sincerely think before they let it become the law of the land.

6.9 p.m.

The Attorney-General: I do not think that the discretion conferred on the Commission, wide though it is, is quite as wide as my hon. Friend suggested. I would like to make some observations on the more general points which he raised. It is true that this is the first time that Parliament has been asked to confer powers of this kind on Special Commissioners, subject to a right of appeal. Let me tell hon. Members why Parliament is being asked to do this. We have been faced by what I might describe as a rake's progress by these financial shirkers of their share of taxation. They are not a large body. Anybody has been entitled to arrange his affairs as he wished in the days before Parliament showed a determination in certain directions, as has been laid down in the Statutes, that it was going to make people pay what

Parliament had ordered was their fair share of taxation. A very large number of companies accepted the intention of Parliament and accepted what we call the taxation Clauses, but there have been some wealthy, or at any rate comfortable, people who have conducted a series of rearguard actions against the Revenue in this matter. The tax avoider was normally a shareholder. Parliament having said that he should pay his share of taxation he then said: I will put in as shareholders people who are not taxpayers and will apportion the income to them. I will maintain my rights by becoming a loan creditor instead of a shareholder.

Mr. Bracken: What does my right hon. and learned Friend mean by the intention of Parliament? So far as I know no committee can tell what the intention of any Parliament is, not even the Members of it.

The Attorney-General: Anybody who could not see what the intention of Parliament was in Section 21 of the Act of 1922 must be a very stupid person. This important Section attempts to prevent the avoidance of Surtax by withholding of income from distribution by companies.

Mr. Bracken: Mr. Pitt in this House over 130 years ago introduced an Act against Income Tax evasion and complained about a monstrous misrepresentation regarding the intentions of Parliament. How could anybody outside Parliament decide the intentions of Parliament unless those intentions were clearly-set down in the law?

The Attorney-General: This is a case in which Parliament has set down its intentions unusually clearly. There is not the slightest doubt that companies and others, when dealing with these matters, should know the kind of device which Parliament has intended to stop. Parliament has clearly intended that certain devices shall not prevent the payment of Surtax. We have no right to talk about the intention of Parliament; all you can talk about is what Parliament has enacted. In this case I think Parliament's intention is perfectly clear in the Act, and the tax avoiders have tried to defeat that intention. For instance, instead of having shareholding rights, a man who is a loan creditor has rights only in liquidation. He


may say, "I am not interested in the income, and therefore you cannot apportion it to me. My only right is when the company is wound up;" and he is, of course, at liberty to wind it up when he likes. I have in mind a series of schemes each designed to get round the Acts passed in previous years. I have had a case, for instance, in which the suggestion was put forward that a man had no interest in the company because he had only an option, which he could exercise at any time, on the shares, but not the shares themselves. That shows the kind of artificial devices which are resorted to.
The next step, and the stage against which this Clause is directed, is this: The man who is really interested will not have any shares or any rights in the liquidation, but he will so arrange the articles as to have his friends or clerks as shareholders, and, as the director, someone who will do as he says; and there will be a power in that director to issue shares, carrying all the liquidation rights, at his discretion to anybody he likes. People have already begun to walk through that door, and, unless it is closed by a Clause of this kind, they will all walk through that door and will take a very substantial amount of Surtax with them. As I have said, the width of the Clause does not arise from any desire on the part of the Government to get excessive powers, but simply from the fact that the devices which are resorted to can only be dealt with if a wide discretion of this kind is conferred on the Special Commissioners. You have the case in which the man who is clearly interested does not appear from the beginning to the end of the articles. He has no rights in law or in equity, but he takes good care that there is someone who is in a position to give him those rights later on when he wants to exercise them. My hon. and learned Friend wants to leave out the words
or is likely to be, able.
I am not quite sure whether he appreciates that these words are not unconditional. In order to find that the individual is likely to be able to secure the assets or income, the conditions set out in Sub-section (3) have all to be fulfilled before the right to exercise the discretion arises. I think that that ought to relieve a good deal of the anxiety

which my hon. and learned Friend and others quite rightly feel in considering whether or not a person is likely to be able to secure the assets or income.

Mr. Spens: It is just because of the words of Sub-section (3) that our anxiety arises. The Sub-section says:
For the purposes of this Section, a person shall be deemed to be able to secure that income or assets will be applied for his benefit if he is in fact able so to do by any means whatsoever, whether he has any rights at law or in equity in that behalf or not, and in particular (but without prejudice to the generality of the foregoing words), in considering whether or not a person is or is likely to be able to secure that income or assets will be applied for his benefit regard shall be had"—
and so on. The words in brackets only give an indication as to the line on which the Commissioners may work.

The Attorney-General: I am not sure that my hon. and learned Friend is right, but, if he is, I am quite prepared to consider the drafting. We do not intend this discretion to be absolutely unfettered. Where there is no right in law and in equity, the Commissioners have to consider, first of all:
Whether or not the persons who, whether as directors or shareholders or in any other capacity have, or will at any material time have, powers or rights affecting the disposal or application of the income or assets, are likely to act in accordance with his wishes.
That is to say, first of all you have a relationship of that kind, and then the Commissioners have to be satisfied:
That he has, directly or indirectly, transferred assets to the company the value of which is not represented, or is not adequately represented, in the value for apportionment purposes of any relevant interests which he has in the company.
It is only then that they may draw the inference that he is likely to be able to secure that the assets or income of the company will be applied for his benefit.

Mr. Fleming: It is clear that two persons are referred to, the one entitled in law and the other entitled in equity; and, looking at the definitions in Subsection (6), one finds in paragraph (c) three categories, according to whether the person is entitled in law, or in equity, or in neither. Would the Attorney-General give the Committee an example of the person who will be entitled neither in law nor in equity?

The Attorney-General: Yes, I will endeavour to do so. A man transfers his assets to a company, wishing to avoid the apportionment which Parliament desires. He therefore, in the year in question, has no rights at all, at law or in equity, in the company. When he signs his name to the articles, he is not a shareholder or a director. But the articles enable the director to issue to him one £I ordinary share which will carry the whole of the rights. That is the point. That is a case in which the man is not entitled at law or in equity, and that is the sort of case against which the Clause is directed.

Mr. Loftus: Surely, if he abandons all rights in law and in equity, and hands over the property to the directors, they can seize the property?

The Attorney-General: He takes very good care to see that the director is not a person who can seize the property. I think that as a matter of fact he would be outside the existing law if he were himself a director. He could be a director having no shares and no liquidation rights, but he could give himself the power to issue shares to himself which would give the rights he wanted, and I think he would still have no rights in law or in equity. In any case, he could put in a director who depended for keeping his job on his good will, and in fact that is done.
The Special Commissioners have to find, in addition to other things, that the person has transferred assets directly or indirectly to the company and that the value of those assets is not adequately represented by any rights that he has. I appreciate as much as anybody the drastic character of the Clause, but I have had experience, as some others have had, of the necessity for such a provision if a limited number of people are not to be allowed deliberately, by the most artificial structures it is possible to erect, to avoid making the contribution which Parliament clearly thinks it is fair that they should make to the national need at the present moment. For that reason I ask the Committee to pass the Clause, and hope that my hon. and learned Friend may see his way to withdraw the Amendment.

6.25 p.m.

Mr. Spens: May I take it that the Attorney-General will consider making alterations in Sub-section (3) so as to

make the conditions a mandatory direction to the Special Commissioners as to what they are to be satisfied about before they can assess a third party? I agree that that would make a very substantial difference in the scope of the Clause, and would limit its effect, but if the Attorney-General would go that length it would make a very great deal of difference to my attitude and that of my hon. Friends.
I should like to ask the Attorney-General whether this is not really the wrong way to deal with the trouble? Would not the right way be to provide that, when a man does in fact take steps to secure for himself the income, the actual transaction which deprives the Crown of its Surtax could be declared void against the Crown? Surely that would be a much better way of attacking this horible social sore than by giving to any tribunal, however much we may trust them, the right to say, "Never mind what the law or equity is; the general circumstances are such that here is a third party who may be able to secure income for himself, and, therefore, we are going to assess him." One feels certain that, once laws of this description get into an Act of Parliament, within the next 10 years they will develop.
I believe that the principle of this Clause is wrong. I am just as keen as the Attorney-General is to get at these people, but I wish to get at them in a way that is more in accordance with the historical traditions of this country. We have never given tribunals powers like this. I suppose that the Star Chamber might have been able to do this sort of thing, but we have never in civilised times given such powers to a tribunal of this description, whereas we have constantly given power to the courts to decide that a transaction shall be void as being against public policy, and I should have thought that a Clause based on that principle and administered by the courts would have protected the Revenue and would have prevented what I venture to think are the very far-reaching possible effects if a Clause of this sort is made a precedent. If the Attorney-General is going to press for the inclusion of the Clause in the Finance Bill, I would ask him to narrow it down so that the Special Commissioners have to find certain conditions fulfilled before they can assess a man.

6.29 p.m.

Mr. Keeling: While I am disappointed by the Attorney-General's reply, I do not propose to press him to accept the Amendment of my hon. and learned Friend, partly because I can see that he is adamant, and partly because I have a shrewd idea that my hon. and learned Friend is not going to press the Amendment. But I would like to make this suggestion to the Attorney-General, and to ask him to consider it before Report. Should not words be added to the Clause to the effect that no apportionment of income shall be made against a person who was not in law entitled to that income unless—and this is the important point—he has in fact received a benefit equal to the amount assessed? As the Clause stands, a man may be compelled to pay tax on income which he has no right to receive, which he has not received or even indirectly enjoyed, which he never will receive or enjoy, and which is in law and in fact the income of some other person and is enjoyed by another person, and on which that other person has paid tax. I would ask my right hon. Friend to consider adding words on the Report stage to make it clear that a person shall not be assessed unless he has in fact received the benefit.

6.31 p.m.

Mr. Bellenger: In spite of the eloquent appeal addressed to the Attorney-General by his hon. and learned Friend the Member for Ashford (Mr. Spens), I hope he will not weaken on this point. I am just as keen as any hon. Member to protect the rights of an individual if he be an honest individual and is attempting honestly to carry out the intentions of Parliament—[Interruption]—which, in spite of the hon. Gentleman behind me, Parliament very well understands, even though it may not define them explicitly in legal language. We know very well what we are doing, and so do the people who are trying to evade carrying out our intentions.

Mr. Bracken: I was not saying whether we did or did not know our intentions, but why is it that judge after judge in the High Courts is puzzling his brain and making sarcastic comments as to the difficulty of knowing what Parliament really means by its legislation?

Mr. Bellenger: I quite understand that, but I suggest that the Clause, as now

drawn, will be perfectly explicit as to what Parliament means, and that the judges will have less difficulty in interpreting Parliament's intentions in connection with this Clause than they have in connection with many of those ambiguous Clauses which have appeared in Acts of Parliament. Is not the principle here that Parliament is determined that every individual who receives an income, by whatever method, should pay the appropriate taxes on it? The object of this is to prevent dishonest men evading the carrying out of Parliament's intentions. The honest taxpayer has nothing to fear from this Clause; only the dishonest one has anything to fear. Therefore, I support the Attorney-General on the very clear case that he has made to the Committee, and I hope that he will not be weakened in his stand by the arguments which have been put forward.

6.34 p.m.

Mr. Bracken: Were it not for the fact that everybody in the Committee knows that the Attorney-General is one of our most agreeable Ministers, one might be forgiven for saying that some of the language he used was worthy of Dr. Goebbels. What do the Attorney-General's observations mean? He said, "We are introducing the most drastic legislation at the present moment, but we cannot help it. In recent times some very wicked tax dodgers have arisen and it is impossible for the Board of Inland Revenue to pit their ingenuity against these people." That is a perfectly absurd argument. I will read a sentence or two from a gentleman who was himself not such a good lawyer as the Attorney-General, but was, nevertheless, a very eminent statesman. I am referring to Mr. Pitt. [An HON. MEMBER: "He is dead."] I am glad to see that the standard of education in the Socialist party is rising rapidly. Mr. Pitt referred, 135 years ago, to:
the evasion, the fraud, and the meanness which have struggled to defeat the operation of the assessed taxes, … shame that in a moment like the present, in a contest so awfully interesting to every individual and to the nation, there have been men base enough to avail themselves of the general modifications which were intended to relieve those who might have been called upon to contribute beyond their means, to avoid that fair assessment which corresponded with their circumstances.
Since then, 135 years have passed. [An HON. MEMBER: "And they are still with


us."] I quite agree; and in 135 years' time there will still be legal and illegal avoidance of taxation. And I would say to hon. Members above the Gangway that if they will consider some of the methods, quite legitimate methods, which are used by the trade unions and cooperative societies, they will find that those organisations are not exactly panting with anxiety to pay maximum taxes. It is a mistake to penalise the many because of the few individuals who are able to avoid taxation. The Attorney-General quoted Lord Sumner, but rather brushed him aside. He said that Lord Sumner belonged to different times. But Lord Sumner died only a few years ago, and his observations are still quoted as having high authority in the courts. He said:
It is trite law that His Majesty's subjects are free if they can to make their own arrangements so that their cases may fall outside the taxing Acts.
As there are a few Members of the Liberal party present, I am going to quote what is to them a sacred authority, Mr. Gladstone. He said that the citizen was entitled to do everything within his legal rights to avoid taxation. I am surprised that what remains of the Liberal party, the relics of the Hampdens, have not got up in this Committee and protested strongly against this development of arbitrary power.
I have no sympathy whatever with anyone who illegally avoids taxation, but anyone who does that can be put in gaol. The few people who avoid taxation by legal methods can always be attended to by Somerset House. Can anyone doubt that the most ingenious minds of the land are to be found at Somerset House —though one would imagine, from some of the speeches that are made here, that Somerset House was peopled with village idiots recruited from the most backward areas.
I discerned a certain amount of diffidence in the speech of the Attorney-General when he answered my hon. and learned Friend the Member for Ashford. It was evident that his heart was not in his brief. He showed reluctance to have to answer my hon. and learned Friend in the way he did. Surely it is wrong, in the present Parliament, to adopt totalitarian methods to stop up these admittedly few methods of evasion. I said that the Attorney-General's language

reminded me of Dr. Goebbels. May I say to him that if Ministers now adopt these totalitarian methods the day will come when hon. Gentlemen above the Gangway will be installed in office, and they will say, quite rightly, "The Ton-party thought fit to introduce this totalitarian legislation, and we shall use it to the full now that we enjoy the fruits of office."

6.40 p.m.

Mr. Fleming: I think, from the attitude of my hon. and learned Friend the Member for Ashford (Mr. Spens), that he does not intend to press this Amendment to a Division; and I do not blame him. It is obviously a matter of drafting, because the whole point turns on the construction that the courts are going to put on Sub-section (3). It is all very well for an Attorney-General to get up and assure the Committee that this means such and such a thing. We have already had experience in this Parliament of the trouble which has arisen over the interpretation of words in an Act. In the case of the Official Secrets Act the Attorney-General of the time gave the House of Commons an assurance as to what would happen as a result of that Act, and he was the most surprised man in this country because the exact opposite happened when a case came before himself on appeal. I recall a case where a learned gentleman who was acting as chairman of a tribunal put to me a case of his own and gave me his interpretation of the Act relating to that case. I was so much surprised at that interpretation that I sent it to the present Chancellor of the Exchequer, who himself was surprised that that interpretation could be put on the particular words.
There is no doubt that this Sub-section is going to cause a lot of trouble. We are dealing with only a small number of people who want to avoid their obligations. It is true that they are doing nothing illegal. If it is admitted that the party concerned is very small, should not the greatest care be taken, is legislating against them, to see that the net is not thrown so widely as to drag in innocent people, as was done in one case recently? I am sure the Attorney-General will go into this matter before the Report stage, and take great care of the drafting of Sub-section (3), so that it cannot be extended by the Commissioners to include innocent people.

Amendment negatived.

The Chairman (Sir Dennis Herbert): I did not propose to select the next Amendment, in the name of the hon. Member for Chesterfield (Mr. Benson), but I understand that he attaches some importance to it. If that is so, I will give him the opportunity of explaining what it means.

6.43 p.m.

Mr. Benson: The purpose of the Amendment is to allocate reserves which may have been accumulating and might not be paid out to the real beneficial owners as denned in this Clause. Under Sub-section (4), there is a complicated paragraph which aims at the prevention of double taxation. It seems to me that, as that is drafted, it allows the distribution of reserves in such a way that they will entirely avoid attracting Surtax. It was with the object of preventing that that I drafted this proviso.

The Chairman: If I understand the hon. Member correctly, his idea is that some profits may have been set aside, without paying tax, in one year, and in a subsequent year they may be distributed in addition to the profits made that year. In the circumstances, I am quite prepared to call on the hon. Member to move the Amendment.

Mr. Benson: I beg to move, in page 15, line 31, after "that," to insert:
(a) for the purposes of this Section if the total income distributed by the company in or during the said year or period is greater than the total income apportioned among the members of the company in accordance with Sub-section (2) of this Section for the said year or period the amount by which the total income distributed exceeds the total income apportioned shall be apportioned to the members of the company for the purposes of Surtax in accordance with Sub-section (2) of this Section.
Sub-section (4) states that if an allocation has been made of the income for the year, and that allocation is different from the actual distribution according to the boks of the company, then wherever the income distributed by the company is greater than the allocation made by the Commissioners, the surplus shall not be regarded as the income of the owner for Surtax purposes. That income has actually been allocated to another member or possibly non-member of the company. Sub-section (4) visualises that the amount of income distributed for the year is either less than, or equal to, the

amount apportioned by the Commissioners. It may happen that the company have accumulated reserves in the past which have not been distributed and therefore have not necessarily attracted Surtax, but if they are distributed after this Clause has been passed and after a specific allocation under it has been made, not a single pound will attract Surtax. The amount allocated or apportioned by the Commissioners is the income for the year. If you distribute the income of the year, plus the reserves, no tax can be charged under Sub-section (4) where the income distributed is greater than the amount apportioned. Therefore, if a company that comes under this Sub-section distributes not only its total income, but: its reserves, those reserves will not attract tax. When reserves are distributed, they should be apportioned on the correct basis and so attract tax.

6.48 p.m.

The Attorney-General: This Amendment would, in fact, make the provisions of this Bill retrospective in respect of profits earned in past years, and I suppose that my hon. Friend who criticised me earlier on the question of the retrospection will now rally to my support in resisting the hon. Gentleman's suggestion. The Clause, as drafted, applies only to the income which would follow under the direction made in respect of 1938-39, and the hon. Member wants to extend it to the income of previous years. In these earlier years there either will have been or will not have been a reasonable distribution. If there has been a reasonable distribution, it would be quite wrong to penalise such amount as was not distributed, because in those years the company would have done everything that was right and proper. If a reasonable amount was not distributed, there will have been a notional distribution. The Amendment introduces a retrospective element which is not justified, as we dealt with the earlier years in earlier legislation, and I ask the Committee not to accept the Amendment.

Mr. Benson: I cannot follow the right hon. and learned Gentleman when he says that the Amendment has a retrospective action. The effect of the Amendment is that income shall attract Surtax when it is distributed.

The Attorney-General: Or apportioned under the earlier legislation.

Mr Benson: The income apportioned by the Commissioners is approximately the income which the companies receive every year. On top of that a company may distribute the whole of its reserves which may not have attracted tax.

The Attorney-General: They may have.

Mr. Benson: They may have attracted tax or may not. There are certain reserves which have not attracted tax under previous legislation. If the Clause goes through as it is drafted, reserves which have not attracted tax can be distributed and may not be regarded as the income of the Surtax payer under Sub-section (4). It is for the purpose of remedying that that I have put down my Amendment. There is no retrospective action at all.

Amendment negatived.

Clause ordered to stand part of the Bill.

CLAUSE 16.—(Additional powers of Special Commissioners to obtain information for purposes of s. 21 of Finance Act, 1922.)

6.54 p.m.

Mr. Keeling: I beg to move, in page 16, line 37, after "time," to insert, "not being less than twenty-eight days."
The object of this Amendment is to prevent a demand for information at too short notice. I do not suggest that in this matter the Special Commissioners are likely to be harsh or unreasonable, but you never know. and I think that investment companies are entitled to the protection of this Amendment.

The Solicitor-General (Sir Terence O'Connor): I am much obliged to my hon. Friend for suggesting a very valuable addition to the Clause, and I have much pleasure in accepting the Amendment.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 17.—(Explanation and amendment of paragraph 6 of Second Schedule to the Finance Act, 1936.)

6.55 p.m.

Sir Percy Harris: I beg to move, in page 17, line 29, after "solicitor," to insert "or professional accountant."
It is common knowledge that a great deal of this work is done by professional accountants. It has been pointed out to me that as this privilege is given to solicitors, it is not unreasonable to give it to accountants who render such excellent services both to the Revenue authorities and to persons liable to be taxed. I do not want to press the point too much, but if the learned Solicitor-General can give me a sympathetic reply, it will be very much appreciated by the accountants concerned.

6.56 p.m.

The Solicitor-General: If a negative reply can be sympathetic, then the hon. Baronet will not be disappointed. The trouble is that we are dealing here with an area where we are trying to prevent tax evasion by the transfer of assets abroad, and the Clause is really purely declaratory of the existing law. It suggests that certain particulars must be furnished by persons or by their agents in relation to these transactions so that the transactions may be identified. Subsection (2) to which the Amendment of the hon. Gentleman applies preserves for solicitors the privilege that they enjoy at present. The only information that the Commissioners may request from solicitors will be information as to names and addresses and nothing else. They are not required to disclose documents or the instructions that they have received. This is a privilege which the profession of solicitors enjoys under the existing law by reason of a long history of case law. The accountants enjoy no such privilege under the law.
The hon. Baronet is asking for a privilege for accountants which no other agent would be permitted to have, and which solicitors only enjoy by reason of the existing law. Privilege is a valuable thing to conserve, but it is a very dangerous thing to extend. Privilege by its very nature means the obstruction of the truth. It is a barrier between the investigation of the truth and the actual arrival at the facts. It is not easy to justify in an area where you are dealing with deliberate evasion, and were it not for the fact that the privilege exists enabling a person to go to his solicitor for advice, and while it might be difficult to justify it, I should find it impossible to stand here and justify its extension to one particular kind of agent, who, in many cases, is the very


man from whom you want to find out what he knows about the Luxembourg Company or the Palestine Company or the company with which you may be concerned, especially when I remember standing at this very Box and saying that this privilege was not intended in the case of doctors dealing with patients or clergymen dealing with parishioners. I am sure that the hon. Baronet will not wish to press his Amendment.

Sir P, Harris: In view of that general explanation, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.0 p.m.

The Solicitor-General: I beg to move, in page 17, line 29, after "not," to insert:
be deemed for the purposes of paragraph (c) thereof to have taken part in a transaction by reason only that he has given professional advice to a client in connection with that transaction, and shall not.
These words are moved in order to clear up a point which has been raised by the Law Society as to whether even with Subsection (2) we are not infringing a privilege which they at present enjoy. The whole point is that they are afraid that the solicitor who has merely given advice to a client on a matter within Section 18 and has done nothing else would be called on to disclose the matters with which the Clause deals. It was clearly never intended that the Commissioners' powers should extend to a case of that kind, and the words I propose to insert are to ensure that a solicitor who does no more than that is not to be regarded as having taken part in the Section 18 transaction at all.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 17, line 35, after "done," to insert "by the solicitor."

This is a drafting Amendment.

Amendment agreed to. Further Amendments made:

In page 18, line 4, after "done" insert "by the solicitor."

In line 8, after "done" insert "by the solicitor." —[The Solicitor-General.]

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 18.—(Power to obtain information as to income from securities.)

7.3 p.m.

Mr. Benson: I beg to move, in page 20, line 16, after "income," to insert "prior to the fifth day of April, nineteen hundred and forty."
I think that in the discussion the hon. Member for North Paddington (Mr. Bracken) said that the Attorney-General was one of the most agreeable members of the Government. This afternoon he has agreed to nothing. I was rather perturbed when I saw the Solicitor-General following very carefully in his footsteps. This Amendment and the next deal with the question of the right of a bank to refuse disclosure of the actual owners of securities which it holds. Subsection (5) of the Clause very rightly protects a certain number of foreign holders who have invested here but who do not wish their names to be known owing to unsettled conditions on the Continent and the powers of totalitarian Governments. It is perfectly true that disclosure by the bank to the Board of Inland Revenue means a disclosure to a very secret body but the mere fact that there is a disclosure might make those investors afraid. There is, therefore, a very definite group of investors for whom we may tolerate secrecy. On the other hand there are British companies regarding whose investors we cannot tolerate secrecy. For instance, it would be intolerable that German money should be secretly put into one of our newspapers or our armament factories.
We had a long discussion some months ago on the question of the secret ownership of important shares particularly in companies dealing with organs of public opinion. If there is any foreign ownership in companies of that kind there should not be any right by the bank to refuse disclosure. Therefore, I suggest that any foreigner who wants to invest money in this country secretly should confine himself to trustee securities. On the other hand one must give adequate time for adjustments to be made, so I propose that a bank shall be compelled to disclose 12 months hence any holdings other than holdings of trustee securities where those securities are held by foreigners.

The Solicitor-General: I have the greatest sympathy with the motive of the hon. Member for Chesterfield (Mr. Benson) in the Amendment, and I know that he has sympathy with the attitude which I must inevitably take up in resisting this Amendment. This is a Clause which has as its object to enable the Special Commissioners to get information as to persons beneficially entitled to income from United Kingdom securities either when they are registered in the name of nominees or when they are in bearer form. In relation to both these matters, of course, the banks and the bank nominee companies are most closely concerned, and the Clause has been drafted in close consultation with representatives of the banks. The application of the Clause is confined to income from United Kingdom securities and there is no obligation on banks to disclose where the person beneficially entitled is not resident in the United Kingdom. Admittedly that introduces an illogicality in the structure. The justification for it is this. If disclosure is insisted upon, in the present state of the world, the banks, having very large deposits of cash and securities from sources abroad in respect of which they have given assurances that they would not be likely to be submitted to any investigation of ownership, would feel the greatest possible embarrassment in relation to their foreign customers on account of the assurances that they have given. That situation exists because these depositors have relied upon the traditional secrecy of our banking system. The Amendment which the hon. Gentleman proposes would in fact create a very grave difficulty for the reasons I have given. I knew, apart from what the hon. Gentleman said, by looking at his Amendment that he anticipated these objections and desired to meet them because he has limited his Amendment to 1940 so as to give time for the change to be made, and he has also limited his case to non-trustee securities. But we are advised that that really would not be satisfactory as a reassurance by the banks to their foreign depositors, who would be entitled to feel that, qua the banks, it would be a breach of assurance and the thin end of the wedge.
As regards discrimination between trustee and non-trustee securities that, I

think, is not justified, because either type might give rise to Surtax liability, providing the very material which the Clause is designed to assist us to discover. We do not think the appropriate method would be to try and force foreigners into trustee securities by a discrimination as between the methods by which we are to obtain information. For those reasons I hope that the hon. Gentleman, recognising the grave international difficulties in volved, will not think that this is an appropriate moment for his Amendment. Perhaps when the world settles down and so much refugee money is not finding its way here, and so many balances are not being built up in what is deemed to be a place of great security, where people do keep and honour their pledges, in those happy days we may look forward to rounding off this Clause by just such an Amendment, but I am afraid we cannot accept it for the reasons given.

Mr. Benson: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

7.11 p.m.

Sir A. Beit: May I ask the Solicitor-General how he proposes to enforce on companies that they should reveal who are the beneficial owners of their bearer shares when they never know themselves? The Solicitor-General probably knows that a number of bearer shares in South African gold-mining companies are very popular on the Paris market and the companies in question never have the least idea who are the owners of the shares or what proportion is held at home or abroad. The dividends are collected by coupon. I merely seek information on how it is proposed to get this information as to the owners of bearer securities.

The Solicitor-General: You cannot get blood out of a stone but you can go to a bank and ask in whose name is the real share deposited, and if you find the bearer you can ask on whose behalf he holds it. That would get us a little further.

CLAUSE 19.—(Information as to payments to employés and others.)

7.12 p.m.

Mr. A. V. Alexander: I beg to move, in page 20, line 35, to leave out Subsection (1).
Perhaps there was no Clause in the Finance Bill when it was published which excited more public attention and more Press criticism than Clause 19, which seeks to provide statutory requirements for return of expenses above a certain amount and provides for them being brought into assessment for tax. I think with few exceptions Members in all parts of the House would have a great deal of sympathy with the main objective of the Government, namely, to deal with cases where people like directors or others take small fees but in fact make very large incomes by having large sums allowed annually as expenses. This Sub-section has given rise to a great deal of dubiety as to whether or not necessary and legitimate expenses of employés, or the representatives of trade and organisations would fall to be taxed quite unnecessarily, or that there would be such a vexatious requirement of returns as would be highly inconvenient and would perhaps cost the revenue more in collection than they would gain from it.
After the statement of the Chancellor of the Exchequer on the Second Reading of the Finance Bill in regard to this matter, we began to see a little daylight, but it was not specific enough. Since then, I have had consultations direct with the officials of the Board of Inland Revenue, and I must say at once that I am very much obliged to those officials for their careful attention and their great courtesy. In regard to employés who receive reimbursement of expenses legitimately incurred in the course of their occupation, or expenses on a fixed scale, paid to properly authorised representatives of firms or organisations, we understand now from the Board of Inland Revenue that there will be no requirement for a return to be made; but it is essential for them to have statutory powers to require returns of expenses of the kind I mentioned at the outset of my remarks, such as expenses which would be quite unjustifiable on any other ground than that they are an expansion of official income.
We have kept our Amendment to leave out Sub-section (1) on the Order Paper, because we should like an effective statement from the Government which will make it clear not only to those of us who arc connected with individual organisations but other people who are concerned about this matter, that there will be actual

protection for the two classes of expenses I have mentioned, which might otherwise be mulcted in the operations of this Clause. I hope it may be convenient to the Financial Secretary to make such a statement to-night on this matter as will make it clear beyond peradventure to all who are concerned that the expenses of employés or of properly accredited representatives of firms and organisations, reasonable expenses or reimbursement of expenses incurred will not be the subject of return. A statement of that kind would be very reassuring.

7.19 p.m.

The Financial Secretary to the Treasury (Captain Crookshank): I readily accept the suggestion of the right hon. Gentleman that I should make a statement, and I hope that what I may say will be both effective and lucid, and that if my right hon. Friend's statement the other day caused him to see a little daylight my remarks may dissipate what remains of his gloom. It is obvious that the objective of this Sub-section is to try and catch cases which have come to our notice, such as the case where the salary payment is £100 and the expenses £900. There is an even better illustration, if the Committee would like it, and that is where there was no remuneration at all, but the allowances were such that when at last a decision could be reached on the question of the amount to be assessed, they total led up to £2,000 a year. There is a loophole which ought to be stopped up. Incidentally, the very word "allowances" causes some people who receive them to think that because of the word itself the allowances are not ordinary income and that they do not need to disclose them as such. That is the broad purpose which my right hon. Friend wishes to secure by this Clause. It imposes no new liability, nor does it alter in any way the basis of tax.
The right hon. Gentleman has moved his Amendment in order to raise the question at issue. May I briefly say what the Sub-section does? It is divided into three paragraphs, (a), (b) and (c). Paragraph (a) deals with the question of expenses, whether they are reimbursements of specific expenses or whether they are a round sum. When there is no reason to doubt that these sums genuinely represent expenses in carrying out duties, there never has been in the past the power to tax them and


it is not intended that there shall be in the future. Paragraph (b) deals with payments made not to an employed person but on behalf of an employed person. These sorts of payments are generally taxable emoluments, even if they are paid by the employer to someone else. Let me quote a case. Let us suppose that part of the emolument is the paying of rates on a house. The employer does not pay the rates to the employé but to the appropriate authority. That comes within the sphere of a taxable emolument of a pecuniary nature. It does not, however, apply to what one might call emoluments in kind, such as railway uniform, or the value of a house where a man is required to live for the purpose of his work, such as a railway servant. That is not a pecuniary emolument within the definition. Paragraph (c) looks rather queer when it says:
Any payments made to employés in a trade or business for services rendered … whether the services were rendered in the course of their employment or not.
That is meant to cover the case where the employé who is employed in a regular job for a certain purpose gets payment for doing something else which is not his ordinary job. Suppose I were a clerk in an insurance company, doing ordinary clerical work, and I managed to introduce business to the company, which had nothing to do with my actual clerical work, and the company gave me some payment or commission. That is what is meant by the words:
whether the services were rendered in the course of their employment or not.
That is, services other than the normal.
It is the intention of the Inland Revenue and of my right hon. Friend to try to deal with this matter in a reasonable way. Since the proposal was first made we have had an opportunity, as the right hon. Gentleman opposite said, of having conferences with a number of persons of a representative kind to see what it would be wise to exclude from the returns. If it is of interest, and perhaps it is, for the purpose of record, I might tell the Committee what notice we intend to send out to employers who have to make the returns, in order to give them an indication of what is required. I must not, however, be tied to the exact words, because there may be some amendment

in drafting. This is what is intended. First:
Any payments in respect of expenses which represent no more than the recoupment of, or provision for, expenses that were actually incurred by the employé in the performance of the duties of his employment need not be included in the return.
I will pause there to amplify what that means. It secures the exclusion from the return of payments which are of the precise measure of the expenses actually incurred, whether they are moneys spent or payments in advance. The second provision is this:
Where provision for expenses is made in accordance with a regular scale, any payments made under that scale need not be included in the return, provided that the employer will furnish to the Inspector of Taxes particulars of the scale and such other information as he may require as to the amounts paid in specified cases.
It is true that a great number of employers who are concerned with this have a normal scale on which they pay so much a week for the expenses of their employ6s. This second provision means that, provided the scale is communicated to the Inland Revenue, payments made under that scale would not have to be returned. I would add that there is some virtue in the words:
the employer will furnish to the Inspector of Taxes … such further information as he may require as to the amounts paid in specified cases"—
because some of the dodgers we have been talking about may adopt a scale of their own, which would not be acceptable. It is, therefore, necessary to safeguard that point, but it does not apply to thousands of genuine persons who may be concerned. There was a scale of that kind in one case which concerned payment of expenses, the allowances for which were certainly not on the scale of railway companies or co-operative societies, or other organisations with which hon. Members are concerned. It calculated the allowances on a percentage of the business done. That was a very convenient scale to get out of paying taxation. Therefore, we consider it necessary to put in the safeguard that in specified cases further information may be required. The third provision deals with grants and allowances:
All other payments for expenses and in particular all round sum allowances in respect of expenses (other than advance payments


made to the employé subject to his repaying to the employer any excess of the amount advanced over the actual expenses) must be included in the return, if the aggregate amount of the payment to the employé for the year exceeds £25.
Apart from "scale" payments round sum allowances may be excluded only if they are given subject to repayment of any amount in excess of expenses actually incurred; that means unless there is some sort of check by the employer or, alternatively, it may be that the employé gives a certificate to his employer from the business point of view. In that case it is not necessary to put that in the return.
From the conversations we have had I think I am right in saying that it is best to do this by administrative means and not by putting it into the Bill. The difficulty of putting it into. the Bill is great from the point of view of definition, and we do not want to have any possible loophole for the cases we want to catch. The Inland Revenue does give the benefit of the doubt to many people through their administrative powers of waiver. Under Section 105 it is only necessary for returns to be made in the case of persons who are getting over £125 a year, but, as a matter of fact, in the case of a married wage-earner it is not necessary to fill in a return if the amount earned is less than £225 per annum because no tax is payable by reason of the married allowance, and, therefore, it is waste of time to get that information. On the whole it is far better to allow the Inland Revenue to deal with the matter in this broad way. I have described the draft notice which it is intended to send to employers, and it has been discussed with the large number of persons more particularly concerned.

7.32 p.m.

Mr. Lathan: Hon. Members who are interested in the question of expenses will have heard with interest and pleasure the explanatory statement of the Financial Secretary, but there are still one or two points which need to be cleared up. Can the right hon. Gentleman tell the Committee whether it is intended to retain the limitation in the proviso to Sub-section (2)?

Captain Crookshank: The proviso in Sub-section (2) does not apply to Subsection (1) at all. I think the hon. Member is under a misapprehension.

Mr. Lathan: In that case I have been under a misapprehension, and from the information which I have supplied to the Financial Secretary there have been a good many other people concerned in this matter who have also suffered from the same misapprehension, including the Chartered Institute of Accountants and the Incorporated Institute of Accountants, both of whom in their journals have indicated the objections which could be raised to such a limitation which they believed was imposed by the Clause. However, we are glad to learn that it does not apply, and it will render it unnecessary for me to move my Amendment. I should also like an assurance that it is the intention of the Inland Revenue Department to hand the notices, of which the Financial Secretary has spoken, not only to the employers but to employés as well. The Financial Secretary referred to large employers, the railway companies, and insurance companies and co-operative societies, who employ hundreds and thousands of people, who will come within the arrangements under this Clause. I should like to know whether a statement made by the employing organisations as to the range of their scale allowances will be held to cover every individual coming within such an arrangement? If that is so it will simplify matters substantially.

7.35 p.m.

Mr. Simpson: The Chancellor of the Exchequer observed in connection with another Amendment that he did not desire to clutter up the Clause with unnecessary detail which might prevent him from catching the big fish. We are all in favour of catching the big fish, and our intervention on this Clause does not represent any opposition to the real purpose of the Chancellor of the Exchequer. But we did feel that as drafted it would involve an enormous amount of unnecessary work for no good purpose, and we are obliged for the statement which the Financial Secretary has made. I should like to ask whether we can take his statement as representing what I believe are known as taxation rules, which will be firm and definite in that sense. The right hon. Gentleman also made a reference to the £25 limit. We are not quite clear what is the purpose of that amount, and I hope he will amplify his statement in order that we may be satisfied that it does not represent an imposition which is unneces-


sary and which might be unduly onerous in some cases.

Lieut.-Colonel Acland-Troyte: As far as I can make out, the Financial Secretary has met the point of my Amendment and, therefore, it will not be necessary for me to move it. I take it it means that local authorities are not to be worried with unnecessary returns, and I should like an assurance that the scale will include a mileage account. I do not think it will be necessary for me to move my Amendment, although I should like to reserve my right to do so until I have heard the right hon. Gentleman's reply.

7.37 p.m.

Mr. Mander: I want to support the introduction of this Clause from this point of view. Apart from the protection of revenue I think it will be effective, if it is properly used, in stopping that curse of industry, the bribery which, unfortunately, is still widespread in spite of the passage of the Prevention of Corruption Act and the activities of the Bribery and Secret Commission Prevention League. I have given a good deal of attention to this subject for a number of years with a view of finding out whether through revenue action or otherwise we could deal with this question. I would ask the right hon. Gentleman to consider very carefully how he frames his regulations, and that he will not do anything which will hinder the object which I am now suggesting. It is quite an easy thing for firms who do not perhaps themselves desire to be too closely associated with a system of bribery to give a salary and to give very large expenses to their employés out of which it is understood they are to be allowed to make certain illegal gifts. I hope the Treasury are going to watch this closely and that when they find the case of a small salary and very large expenses, they will use their powers to ask for the details of the way in which the money has been expended, and if in certain cases it has been given to other persons that they will ask for the names and addresses of those other persons with the object of getting the tax paid by the persons to whom the gifts are made.
They will find, I think, in cases of this kind that firms will be very anxious not to disclose the fact that they have been making illegal and corrupt gifts and will pay the tax themselves. I am sure that

there are ways of obtaining the tax which it is well worth the time and the trouble of the Treasury to adopt. The Financial Secretary made some reference to "expenses incurred," and said that if a statement was made that a man had definitely used the money for paying his expenses it would be taken as sufficient. I hope that does not mean that the Treasury are not going to inquire into the matters to which I have been referring, and into the way in which the money has been expended when it bears a strange relation to the amount of the salary that is paid. I am quite sure that the Treasury are fully alive to this position and that they can form in their own mind what is a reasonable salary and what are reasonable expenses, and will know when to look further into the question of bribes.
I urge the Financial Secretary not to pigeon-hole this Clause, but to use the powers, which are undoubtedly given, to deal with this problem. I know that the Treasury are mainly and properly interested in getting money; they are not interested in the prevention of corruption or any illegalities of this kind; they want the tax. But I think this is one of the occasions when they can well use the getting of the tax as an opporunity for doing a great deal to make those persons who endeavour to obtain business by secret commissions smart very severely.

7.42 p.m.

Captain Crookshank: I am glad that the statement which I was authorised to make on this occasion has satisfied hon. Members. The hon. Member for Park (Mr. Lathan) asked whether the scale would cover everybody. Yes, it will give particulars of the scale from the top to the bottom.

Mr. Lathan: I do not think the right hon. Gentleman has understood my point. Take the case of a railway company. It would have 2,000 or 3,000 clerks and stationmasters, who would be on a definite scale of salary and allowances. If the declaration by the company is held to cover the whole of its employés, it would not be necessary for them to render an account.

Captain Crookshank: They will have to render the particulars of the scale, not of individuals. That is what I meant to convey. They would give the scale, but not everybody within the scale—it would be so much for this type of person and


so much for the other type 0f person. When the hon. Member asks whether the circular will be available for employés, of course they will go to the employers, because they will have to make the return, but I have no doubt that individuals who may want to know any particulars will be able to find out. I do not think they are very much concerned. It is the employer who is concerned as it is his business to make the return. As to the employé, it is his business to return his income and salary if it is within Income Tax limits, but that is another story. It is the employer who has to make out this return.

Mr. Lathan: On the question of payments and allowances many people believe that in future they will be required as individuals to include them in their declaration of income. The Inland Revenue Department issues to each Income Tax payer a declaration as to income for the current year, and gives a circular with directions and advice. I am wondering whether the Financial Secretary can embody in that circular some direction and advice which would cover cases like this.

Captain Crookshank: The answer is that this Clause does not affect their position at all as it does not increase their liability to tax one way or the other. The hon. Member for Ashton-under-Lyne (Mr. Simpson) asked about the £25 limit. That was referred to in one of the paragraphs which I read from the proposed circular. I will not read the paragraph again, but round-sum allowances, other than certain payments, must be included in the return if the aggregate amount of the payments made to the employé in the year exceeds £25. I think that if hon. Members will take into account the three different items, they will find that the cases which do not come within them are very small in number. I know that there is anxiety lest there should be the necessity to make out very long lists, but I think hon. Members will find that the number of cases which do not come within one or other of the three paragraphs of the notice is not a large one.

Mr. Alexander: If we are to understand that the £25 limit is to apply only to the exceptions which are not found within the rule dealing with employés expenses or with the scale of charges, then I am satisfied. I am anxious that there should be

no misunderstanding. A man may have been out travelling for his firm 100 days in a year and may have claimed £150 in a year, but that ought not to be returned, because certainly the man is no better off.

Captain Crookshank: I think it would perhaps be the better course if hon. Members would read what I said, because I was quoting from a draft circular which expresses our intentions, and reserve their rights to raise the matter on the Report stage. I think that might be a more convenient course. My hon. and gallant Friend the Member for Tiverton (Lieut.-Colonel Acland-Troyte) asked whether this would be satisfactory to local authorities. I can only say in reply to him that they have expressed themselves in that sense. As for the remarks of the hon. Member for East Wolverhampton (Mr. Mander), I know that he has for many years taken a great interest in the problem of corrupt practices, bribery, and so on, but I am afraid that information which is obtained by the Inland Revenue authorities can be used only for the purposes of taxation. They are not able to go into the other questions which the hon. Member raised, important though they may be.

Mr. Mander: I fully appreciate that. I was merely pointing out that if properly used, this Clause would make it much easier for the Treasury to obtain information about certain large-scale payments in the way of expenses, a portion of which is used as bribes, and that by asking for information on that, they might get the tax paid by a person to whom the gift is made or by the person who has made it. I ask the right hon. and gallant Gentleman to be good enough to say that he will consider the matter from the point of view of getting all the revenue possible on those lines.

Captain Crookshank: The hon. Member says that this could properly be done, but my suspicion is that it would be improperly done in the case to which he has referred. In conclusion, I repeat my suggestion that hon. Members should consider the statement I have made and reserve any further comments until a later stage. I feel confident that when hon. Members have considered my statement, they will not have any more comments to make.

Mr. Alexander: In view of what the Financial Secretary has said, I should


think that it will not be necessary to move an Amendment on the Report stage. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.50 p.m.

Captain Crookshank: I beg to move, in page 21, line 11, after "of," to insert "all."
This Amendment is the first of a group of Amendments the object of which is to deal with a point brought to my right hon. Friend's notice by my hon. Friend the Member for Gloucester (Mr. Boyce). It may very well be that in some cases —.and in some quarters it is alleged to be the common practice —.services in connection with the formation, acquisition or development of businesses are frequently rewarded not by cash payments, but by options to take up shares in a company. These Amendments will make it possible to obtain information not only about options to take up shares, but also about other non-monetary consideration for services in these circumstances. The Amendments make it necessary for particulars to be given to the Inland Revenue authorities. The value of such consideration may not be capable of being given, because such considerations might be an option to take out shares, and the person giving it would not be able to say what was its value at that moment. I think hon. Members will agree that the Amendment will avoid the possibility of there being evasions.

Amendment agreed to.

Further Amendments made:

In page 21, line 11, after "payments," insert "or other consideration."

In line 12, leave out from "made," to "during," in line 14, and insert "or given."

In line 16, leave out "and the amounts of the respective payments," and insert:
or the consideration given, and, in each case, stating the amount of the payment or giving particulars of the consideration, as the case may be.

Leave out lines 25 to 30, and insert:
This Sub-section applies to any payment or other valuable consideration made or given after the fifth day of April, nineteen hundred and thirty-eight, in the course of the trade or business in question or in connection with its formation, acquisition, development or disposal, being a payment or consideration

which is in the nature of a commission for services rendered, and is made or given to any individual who is not an employé of the person making the return." —.[Captain Crook-shank.]

CLAUSE, as amended, ordered to stand part of the Bill.

CLAUSE 20 ordered to stand part of the Bill.

CLAUSE 21.—(Estate duty on certain interests arising on death.)

7.53 p.m.

Mr. Spens: I beg to move, in page 22, line 20, after "provided," to insert:
with the knowledge and consent of the deceased.
This Amendment is the first of three Amendments which should be taken together. This Clause is properly aimed at endeavouring to stop what is admittedly a very serious method of getting round the provisions of Section 2, Sub-section (I, d)of the Finance Act, 1894, but in the way in which the Clause is worded, it appears that in the case of a great number of transactions of insurance, which have nothing whatever to do with any form of avoiding Estate Duty, it would result in the increase of the deceased person's estate. If hon. Members will look at Sub-section (1) of the Clause, they will see that any annuity or other interest, which mostly consists of policies of insurance taken out on the life of the deceased, which arises on the death of the deceased, and which is purchased or provided either wholly or in part by any person who was at any time entitled to, or amongst whose resources there was at any time included, any property derived from the deceased, shall be deemed to be an interest provided by the deceased, and shall result in the value of that annuity or amount or policy monies increasing the estate of the deceased and be aggregated with the rest of his estate.
The first point I want to make is that this may be done without the knowledge or consent of the deceased. For instance, if an employer has at any time paid a bonus to an employé which that employé has thought, in his own interests, it is desirable he should expend in taking out a policy on the life of his employer, knowing that he may be very much worse off if the employer dies, that is a case of a person who has among his resources money derived from the deceased and who has provided himself with an interest to arise on the death of the deceased. The


result will be that under this Clause, although the deceased may have known nothing about it, when the employer dies, his estate will be notionally increased by the amount of that interest with, which the employé has provided himself, and the result may be substantially to increase the rate of Estate Duty which has to be paid on the estate of the deceased. It seems to me that that is a point which requires very careful consideration. No person ought to have his estate, for Estate Duty purposes, without his knowledge or consent, become very much greater than he knew about, and thereby be subject to a rate which is higher than he had anticipated.
The second point I want to make is this. I do not suppose there is a wife, child, grandchild or dependant who has not had during the life of the husband, father or grandfather some of his resources handed to them. If any wife, child or grandchild thinks fit to insure the life of the husband, father or grandfather for their own purposes, those persons will be persons provided with an interest to arise on the death of the deceased. They will be unable to prove that they have not had amongst their resources during the life of the deceased money out of which it might have been provided, and the result will be that, although the father, husband or grandfather had no idea that the wife, child or grandchild was insuring his life for their benefit, nevertheless, on the death of the father, husband or grandfather, it will turn out that the estate has been increased without his knowledge by these wholly independent transactions. It is almost enough to make the deceased turn in his coffin, or at any rate to give him a nasty tremor. However, this is not the really serious point. The serious point is that if the independent transaction takes place wholly unknown to the person, the rate of death duty will be increased without his knowledge and consent and without his having made any provision for it in respect of his estate. Therefore, we suggest that while we are all in favour of the motive behind the Clause, as it is drafted it is going to catch all sorts of transactions and it must result, in the view of insurance companies and others, in very serious difficulties in the provision which wives, children and grandchildren may legitimately and properly make for themselves at present.
Therefore, we suggest certain Amendments. The first is that no transaction which is unknown and is entered into without the consent of the deceased shall come within the provisions of the Clause. The later one is perhaps more drastic, because we do not see how to deal with it otherwise, that where the person who is providing the interest to arise on the death of the deceased is either a wife, child, grandchild, or dependant, those transactions shall not come within the scope of the Clause. I realise that there may be cases where the wife, child or grandchild may be made the agent of the deceased to carry out the very type of tax evasion which the Clause is mainly aiming at. I do not, therefore, like very much the Amendment that we have suggested, but, unless the Solicitor-General can suggest something otherwise, I think it is essential that these transactions by wives, children and grandchildren should be protected, otherwise a very great deal of hardship and wrong will be done. It might be possible to alter the proviso to Sub-section (1) so that, if the transaction could be proved to be wholly independent of the deceased, it might be excluded from the effect of the Clause, but I am certain that, as worded, while the net will no doubt catch the main object whom it is intended to catch, it is going to catch a good many transactions and cause a very great deal of serious hardship in the amount and rate of Estate Duty which will be payable in the future by reason of the very numerous transactions which I am certain the draftsmen never intended to catch, but which will, in fact, be caught by the Clause.

8.3 p.m.

Mr. Benson: I hope the Government are going to resist these Amendments, because in their present form they do not merely open the door, but blast a great hole in the wall of the Clause. In fact, they make it completely nugatory. How on earth can you prove what knowledge the deceased had? With regard to his consent, all he has to do is to say in his will, "I refuse consent and I sternly disapprove of any attempt to insure my life by anyone," and all tax avoidance insurances taken out on his life will be outside the scope of the Clause. The second Amendment simply kills any attempt to catch what is at present a form of avoidance which is enormous in its scope. The annual


amount of moneys paid out by insurance companies on death in this country is £60,000,000. That excludes industrial assurances and surrenders. There are certain policies included in that money which it is impossible to estimate—there is the endowment policy and the policy taken out in respect of a business partnership, —but they can only account for a very small percentage of the £60,000,000. When we look into the amount brought into review for Death Duties, instead of £60,000,000 we find that it is £25,000,000, leaving a gap of £35,000,000. That is enormous. If we look still further, we find one or two other rather extraordinary facts. Of the £25,000,000 which do come in year by year for Death Duties, £17,000,000 are on estates of £20,000 and less, so that estates of over £20,000, running up into millions, include only £7,000,000 a year in insurance. Everybody knows that one of the big motives for insurance is the payment of Death Duties. A wealthy man who is in business may have the bulk of his assets in his firm. He knows perfectly well that the firm cannot stand a reduction, perhaps, of 50 per cent. of its capital. He must insure against it. Then there is the agricultural estate, which again would be crippled if Death Duties amounting to 50 per cent. had to be found.
Testators very definitely insure their lives for the purpose of meeting Death Duties, but when we examine their estates we find no trace of an insurance policy. It is done in this way. A settlement is made on a beneficiary and the insurance premium taken into consideration, and the settlement is increased by that amount. But, when the death takes place, that is not an interest passing at death. It is the property of the beneficiary and never has been the property of the deceased. According to the Amendment of the hon. and learned Gentleman, all that is going to be excluded, although these policies are taken out largely by the children of the deceased for the purpose of meeting the Death Duties and they are paid for by money derived from the deceased. How many people insure the lives of individuals who are not their parents or their relations? Very few. The bulk of the insurance for the purpose of meeting Death Duties is taken out in the name of the beneficiaries in order that it may not attract

duty, and the Amendments will allow that great and scandalous evasion to continue.

8.8 p.m.

The Solicitor-General: It may be for the convenience of the Committee, and I think it is necessary in order that the discussion that has taken place may be fully appreciated, that I should say a word or two about the scope of the Clause. By the Finance Act, 1894. property passing on the death of the deceased, that is, property which attracts duty, includes an annuity or other interest purchased or provided by the deceased by himself or in concert with anyone else. If we keep to the example my hon. and learned Friend the Member for Ashford (Mr. Spens) gave of a policy of insurance, it will illustrate the whole position. The normal case, which the hon. Member for Chesterfield (Mr. Benson) was speaking of, may be illustrated by a man who has, for example, £100,000 of fortune. He desires to insure his life, and takes out a policy for £15,000 and pays the premiums. When he dies, that policy is aggregated with his estate and it bears Estate Duty, just like his watch, his horse, his house, or any other investment that he has.
Now I will let the Committee into a secret. Those provisions are easily, and have been consistently evaded by the simplest of all possible devices. In the present state of the law, if a gentleman makes a gift of £50,000, for example, to his son more than three years before his death and then his son lends it back to him at 5 per cent, interest, and, with the £2,500 a year, pays the premiums on a life insurance policy for £50,000, the following startling results occur, that on the death of the father the provisions of the Act of 1894 do not enable the insurance policy which results to be brought into the deceased's estate. It is not, in the terms of that Act, an interest purchased or provided by the deceased. It has been provided by the son. It is to prevent that result occurring, and that clear evasion of the Act of 1894, that Clause 21 is designed. The second result: is that, when the father dies, he is indebted to his son to the tune of £50,000, and that is a debt due from his estate at the time of his death, and therefore he is entitled to reduce the total amount of his estate by that amount, and the


Revenue consequently loses by a diminished aggregate of the whole estate. That is the evil which Clause 22 is designed to remedy, to see that artificial debts created of that kind shall not rank as diminishing the estate that passes at the death.
The cases that I have quoted are deliberately simple ones and, if all were as simple as that, there would be need only for a simple Clause to remedy the defect and to result in the burden of Estate Duty lying on the shoulders where it ought to lie. But, in this as in every other case of tax evasion, the inevitable company comes in, and then the matter is very much more difficult to deal with. Now it becomes a case where a gentleman settles, more than three years before his death, £100,000 in favour of his wife and children. A private company has just immediately been registered and the testator hands a cheque for £100,000 to the settlement trustees. They apply the money to taking up all the shares in the company. The directors then lend £95,000 to the testator at a net rate of interest of 6 per cent. and the company effects a policy on the testator's life, the interest on the loan providing the money to pay the premiums. So that by the intervention of the company, the situation has become a little more complicated. Those are the situations with which we are trying to deal in Clause 21 and, as regards repayment of debt, in Clause 22.
We are seeking to do it in this way. First, under Clause 21 we bring into charge all annuities, policies and so on which are purchased or provided by any person who has at any time had any property from the deceased. These are the first words of the Clause and obviously they are too wide because they cover anybody who at any time has had a watch or any other property from the deceased. "Property" we define as including any property which was the subject matter of any disposition. That would include any annual payment made by the deceased to anybody, so that we have still to limit it. We have not attempted to approach the problem by linking the property provided by the deceased, with the money that is used to provide the annuity because if we did that it would simply invite evasion. It would never be possible to associate the two transactions. What we rely on doing is establishing, in the first instance, identity between the

purchaser of the annuity and the possessor of the property that is derived from the deceased.
The second stage is to make- exclusions so that the method shall not operate unfairly. That is necessary because, clearly, there are cases where properly which is traced as going out of the deceased's hands to the purchaser, would not even suffice to purchase the policy. If a man left somebody a gold watch and the person to whom he left it, took oat a policy, the gold watch would not cover the payment, so that we must, to begin with, make an exception there. We then proceed to exclude from the charge the amount by which the value of the policy actually provided exceeds the value of one which the whole of the property derived by any one from the deceased would have provided. That, again, leaves too wide an area of charge. It is necessary because, if you do not do that, you get evasion by transfer to somebody who is, apparently, in no contact with the person who takes out the policy; but this is obviously too wide because it would cover the case, for example, of a man whose son took out a policy, the testator himself having in his lifetime given £. 10,000 to a hospital. Obviously you do not want to set off the £. 10,000 against the amount provided by the son to purchase the policy.
So, the third stage is reached in the proviso to the Clause, and it is at this stage that my hon. and learned Friend the Member for Ashford takes objection to the proposal. You reduce the sum which is chargeable by deducting property which, although it has been derived from the deceased, did not pass three cumulative tests. First it never entered the pocket of the person who took out the policy—still thinking of the son. The money that the father has given to the hospital would clearly fulfil that test. Secondly, it was never in his resources at the time when the policy was taken out. Again the money given to the hospital would pass that test. Thirdly, and this is cumulative, the son would have to satisfy the Commissioners that the property in disposition had no connection with the provision of the policy. Each of those conditions could be fulfilled in relation to a gift of property in the lifetime of the testator, which went, as I have said, to a hospital. But they do not cover the kind of case which my hon. and learned Friend has put to the Committee.
I think my hon. and learned Friend put his case rather too highly. He gave the instance of an employé of the testator receiving a bonus. I think by our definition of "property," we would exclude that case, so I am not very sympathetic to my hon. and learned Friend on that account. But in the Clause as drafted we would still cause to be aggregated with the father's estate, a policy of the following kind. A testator is dependent on his earning power. He has a son to whom he makes an allowance of £200 or £300 a year in order that he may qualify as a doctor or a barrister or in some other profession. The son, being a prudent young man, takes out a policy on his father's life to ensure that he shall be able to continue his professional training. The son has done this without any pre-arrangement with the father, as a matter of prudence and out of the resources with which his father has provided him. That my hon. and learned Friend argues ought not to result in the son finding on his father's death that the policy taken out independently of his father's volition, has been aggregated with the father's estate to bear the charge of Estate Duty.
I agree with my hon. and learned Friend and I hope the Committee will agree that as the Clause is drafted, we have drawn the net a little too tightly, because the son in that case could not pass through the cumulative tests which I have described. He could not establish that this was never included among his resources and that the disposition was not with a view to enabling or facilitating the purchase or provision of the annuity. The burden is placed on the person who took out the policy, of establishing to the satisfaction of the Commissioners, that the disposition of which it, or the property which it represents was the subject matter, was not made with a view to enabling or facilitating the purchase or provision of the annuity. If he can satisfy that condition then, clearly, in equity, he ought not to be required to aggregate a policy which he has taken out himself, with the resources of the person who is devising the property. We therefore propose at a later stage to eliminate the first two of the tests contained in the proviso, in other words to cut out

that the person aforesaid was not entitled thereto, and that it was not included amongst his resources at the time of the purchase or provision of the annuity or other interest.
That will make the test in every case that the person deriving the property should not be brought within the Estate Duty of the testator if he establishes the fact that that disposition was not made with reference to or with a view to enabling or facilitating the purchase or provision of the annuity or other interest.
I am conscious that this does not go as far, or anything like as far, as my hon. and learned Friend's Amendment would seek to go, but as to that I must express my complete agreement with the hon. Member for Chesterfield. This Amendment, as it stands, would make the Clause quite inoperative. So far as the second Amendment is concerned, it would simply exclude the very cases which we want to catch, and so far as the first Amendment is concerned, it would make the scheme unworkable. As the hon. Gentleman pointed out, in many cases, the testator being dead, it would be an impossible burden to put upon the Revenue to establish the intent of someone who had long since perhaps vanished from the scene.
But there is an alternative argument which may influence my hon. and learned Friend to withdraw his Amendment, and that is that if that view is not correct—and he seemed to doubt whether it was, with his great experience of proving after people are dead what they thought while they were alive—it is very difficult to conceive of a person taking out a policy on the life of someone else with any responsible insurance company without getting that person medically examined, and it is extremely difficult for anyone who has subjected himself to a medical examination at the hands of an insurance company to say that he had no knowledge or consent with regard to the process. So it may be that my hon. and learned Friend's safeguard would not in fact prove a safeguard when it came to be more closely examined. For these reasons we cannot accept either of my hon. and learned Friend's Amendments. But I hope the Committee will feel that the kind of case that I have given is one that clearly ought to be excepted from the operation of the Clause and that that hard case should be dealt with at a later stage of the Bill.

8.28 p.m.

Mr. Pethick-Lawrence: Before the Amendment is withdrawn, as I imagine it will be, I should like to make this caveat, that I hope the Solicitor-General will not so modify the Clause, even in the way that he proposes to do, as unduly to limit it. I quite understand that the case that he put forward is worthy of some consideration, but if he is going to withdraw some safeguards, will he do so only so far as comparatively small sums are concerned? He sketched a figure of a couple of hundred pounds a year, and while not asking him to be too precise, I would like him to give some limit for this remission.

8.29 p.m.

Sir John Wardlaw-Milne: I think my hon. and learned Friend who moved the Amendment made it clear to the Committee how very difficult it was to cover the points that he wanted to raise and at the same time not go further than any of us want to go in amending the Clause. We are all grateful for the concession, such as it is, which the Solicitor-General has made, but what I am a little afraid of is that, while the example which he gave may well be covered by the alteration proposed, the change will not deal with all those cases which in every part of the Committee, I think, we should like to see covered by an alteration in the wording of the Clause. I would, therefore, ask him to take into account another example. Take the case of a policy taken, out under the Married Women's Property Act. A takes out a policy under which the money cannot revert to himself and in which he has no interest. He cannot raise a loan on it, and he has no interest in it in any way, yet if his wife has settled any sort of annuity or payment to a third person derived from that policy, when A dies that annuity under the Subsection will form part of the estate of A and will have to pay duty.
It seems to me that that and similar cases which could be brought up—I admit that they are very complicated, and I do not want to claim special knowledge about them, although I can assure the Committee that I have taken a great deal of trouble in trying to understand them myself—are cases of possible hardship. After all, the Act of 1894, to which my hon. and learned Friend referred, gave a very definite concession,

and that concession, as I understand it, was that property in which the deceased had never had an interest—that is the important point—should be treated as a separate estate. As I see it now, from the example which I have given and the example which my hon. and learned Friend himself has given, if no further concession is made, it may well be that some third person who is getting some benefit, say, in the form of an annuity, will find that the annuity granted to him forms part of the deceased's estate, although the deceased had no personal interest in the grant in any way. Therefore, what I rose to say was that I think there are other cases which will have to be taken into consideration, and I hope that between now and a further stage my hon. and learned Friend will consider the matter again. He may then find that the Clause will require further widening than he has suggested to-night.

8.33 p.m.

Mr. Spens: It seems very ungrateful to put a concession under a miscroscope, but I hope the Committee realises that the concession which my hon. and learned Friend has promised does mean that in the case of every insurance taken out by a wife, mother, child, or grandchild on the death of the husband, father, or grandfather, such a person will, under the concession, have to satisfy the Commissioners that it was an independent transaction and that the policy was not provided out of moneys derived from the deceased. It is very important to remember that we are dealing with Estate Duty, which goes down to very small estates, and I would venture to suggest that, in regard to certain very limited classes of relations, the boot might be put on the other foot, and, where you find that a policy has been taken out by a wife, mother, child, or grandchild, it should be for the Revenue to satisfy the Commissioners that it had been provided out of resources provided by the deceased. I put forward that suggestion only because otherwise it seems to me that we shall burden a very large number of perfectly ordinary family transactions with the obligation on the subject of having to go to the Commissioners and satisfy them that it was an independent transaction and not done out of moneys provided by the deceased. As I have realised, my Amendment went rather too far, and I


am very grateful for the concession, but I hope that my hon. and learned Friend will still further consider the matter between now and Report stage and, if possible, alter the wording in such a way that an ordinary family transaction will not fall within the scope of this Clause. Subject to those remarks I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

CLAUSE 22 (Exclusion of certain debts, etc., from deduction in valuing for estate duty.)

Amendments made:

In page 24, line 2, leave out "or included."

In line 9, after "the," insert "whole or a part of the."

In line 10, leave out "or included."

In line 12, leave out "that consideration," and insert:
the consideration given, or of that part thereof, as the case may be."—[The Solicitor-General.]

8.37 p.m.

Lieut.-Colonel Acland-Troyte: I beg to move, in page 24, line 21, at the end, to insert:
Provided also that this Section shall not have effect in any case in which the consideration given consisted of or included property derived from the deceased if and to the extent that such property was the subject matter of a settlement made by the deceased before and in consideration of the marriage of the deceased or of any issue of the deceased.
This Amendment has a very limited application indeed. It is a very common practice for a man on the marriage of his daughters or his sons to make a settlement of a certain sum of money on them. On rare occasions, that sum of money may be lent back to the father on mortgage. In the event of this being done the money will, at the father's death, have to pay Death Duty, and it seems to me very unfair that that should be so. It is quite a common thing for a settlement to be made on the marriage of a son or daughter or grandchild.

8.38 p.m.

The Solicitor-General: I am sorry that I cannot accede to my hon. and gallant Friend's request. Under the existing law

you cannot deduct anything which is a capital sum which the deceased covenants to pay on his death to the trustees of a marriage settlement. Nothing can be deducted. The Amendment would result in this, that money which a testator borrowed from the trustee of his marriage settlement should be put in a better position than capital which he had covenanted to hand over to the trustees at his death. I think that when he sees it in that light my hon. and gallant Friend will realise that his Amendment would create an anomalous position which it would be very difficult indeed to justify. It seeks to make allowable as a deduction money which is borrowed from a settlement which is effected by the testator himself in consideration of his marriage. Of course that conflicts with the whole principle of the Clause. What we are seeking to do in the Clause is to destroy these artificial debts which people create in order to abate the amount of their estate which is liable to Estate Duty at death. A transaction of the kind which my hon. and gallant Friend is suggesting should be exempted is, in a sense, a very unreal and artificial one, and if we allowed it in that case I am afraid we should be opening the door to a class of transactions which the Clause has been introduced to prevent. I know that my hon. and gallant Friend is just as anxious as we are to make the Clause watertight, and I hope that after this explanation he will not feel it necessary to press his Amendment.

Lieut.-Colonel Acland-Troyte: I am not sure that my hon. and learned Friend has got the point which I have in mind, but in view of what he has said I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendment made: In page 24, line 23, after "in," insert "or towards."—[The Solicitor-General.]

CLAUSE, as amended, ordered to stand part of the Bill.

CLAUSES 23 and 24 ordered to stand part of the Bill.

CLAUSE 25.—(Payment into Exchequer out of unclaimed dividends account.)

The following Amendment stood upon the Order Paper in the name of Mr. Ellis Smith: In page 25, line 32, to leave out "the Exchequer," and to insert "a fund to be called the Social Security Fund."

The Temporary Chairman (Sir Robert Young): I have to give the following Ruling. The Amendment would be out of order as incomplete and ineffective without some further proposal to identify or set up the fund. That further proposal is to be found in the proposed new Clause. But the new Clause is out of order as being outside the scope of the Finance Bill. The Finance Bill is based upon resolutions of the Committee of Ways and Means and its object is to make provision (by levying taxes and establishing or improving machinery for collecting them) for meeting expenditure authorised by Parliament: the authorising of expenditure for special purposes is not a proper subject for the Finance Bill.

8.40 p.m.

Mr. Ellis Smith: I desire to raise a point of Order. I would not raise this point of Order under ordinary circumstances, but this is a special Clause that has been inserted in the Finance Bill, and, there fore, in my view, it enables us to raise a point of Order. My point of Order is based upon eight points which have been carefully looked up in Erskine May and in other proceedings of this House. There fore, Sir Robert, I hope you will be good enough to follow the eight points that I desire to raise. Before proceeding to them I consider that this Amendment raises several important constitutional points—

The Temporary Chairman: The hon. Member must state his point of Order.

Mr. Smith: My point of Order is based upon the following eight points. On page 514 of Erskine May there is the following statement:
Providing that no new taxation is involved Standing Orders do not apply to the interception of money before it gets into the Exchequer, as by that means no new burden is imposed upon the taxpayer and no fresh charge put upon the Consolidated Fund or on monies provided by Parliament.
Seeing that the Government have decided to insert this Clause in the Bill, surely it is logical that Parliament should have an opportunity of deciding how this balance should be allocated; and following upon that statement in Erskine May, and seeing that no new taxation is involved and that the proposal would not increase the burden upon the taxpayer, surely it is in order for Parliament to have an opportunity of dealing with this matter. My

next point is to be found on page 348 of Erskine May:
The Chair may ask any Member who has given notice of an Amendment to give such explanation of his Amendment as may be necessary to form a judgment upon it.
On page 887—

The Temporary Chairman: I must ask the hon. Member not to argue the case at length, because the Chair has given its Ruling.

Mr. Smith: That is so, but seeing that this is a new Clause which has not been inserted before, that it is creating a precedent and is raising an important constitutional point, it is surely reasonable to ask the Chair to help us. I want it to be clear that I am not wanting to cross with the Chair at all, but that as this is an important matter and raises such an important point I feel strongly that I am right in asking the Chair to give us a little latitude. On 24th June, 1924, Mr. Speaker had been selecting Amendments, and an appeal was made to him by the hon. Member for South-West Bethnal Green (Sir P. Harris). I will quote from the Official Report:
Mr. Speaker: On the understanding that he will be brief, I will call the hon. Member."—[Official Report. 24th June, 1924; col. 383, Vol. 175.]
The hon. Member was called and his Amendment was carried. It, therefore, seemed, since that could take place in the whole House, and as our proposal raises such an important precedent and constitutional point, that it was reasonable to ask the Chair to be generous enough to interpret the Standing Orders in a way to enable us to make an explanation of why we feel that this subject should be raised in this way. Finally, I submit the point of Order to you, Sir Dennis, and ask for your consideration now. If it cannot be given now, perhaps it might be given on the Report stage in order that we might be allowed to make an explanation on the issue that we desire to raise.

8.47 p.m.

The Chairman: The hon. Member was good enough to give me notice that he intended to question the Ruling upon which he understood that I had decided, namely, to rule his Amendment out of order. I have, therefore, had an opportunity of going into the question, and I thought it would be only courteous to him


and to the Committee, as well as to the hon. Member who has been good enough to assist me, by occupying the Chair, that I should come back in order to give the Committee that Ruling or to answer any questions which the hon. Member might have to put to me. The hon. Member just now quoted a case which referred to the exercise of the power of selection, but that is not the case here. I have come to the definite conclusion that this Amendment, coupled with the hon. Member's proposed new Clause, is out of order.
If there is any doubt on a matter of this kind the tradition of the Chair is that the benefit of such a doubt shall be in favour of the hon. Member who wishes to move the Motion or the Amendment, as the case may be. The present matter, however, has to do with what is in order on the Finance Bill, and, therefore, it is a matter of great importance. If the Chair comes to the conclusion, as I have done quite definitely, that an Amendment is out of order, it would be quite impossible in this case to go beyond that Ruling and to give any indulgence. The hon. Member's Amendment might have been itself in order if it had been followed by some other Amendment; that is to say, there is nothing definite in the Amendment which makes it out of order except—and this is a very important exception—that it is incomplete. In order to make it complete I have to turn to the proposed new Clause. I find it is one which I have been compelled to rule out of order. Therefore, that being out of order, the Amendment must be equally so.
I understand that the hon. Member who was in the Chair a few minutes ago has given the reasons for my decision. If the hon. Member desires to question that decision in any way I shall be quite happy to deal with his questions. I must, however, point out that the Finance Bill is a Bill of a peculiar nature. It is brought in every year for special purposes, and there are special rules and traditions of the House governing it. They have been extended to some extent in certain ways—to which I need not refer, because none of those extensions in any way applies to this particular case. The proposed new Clause would have the effect of proposing something which ought to be done by legislation for the express purpose and by the Committee of Supply. The Finance

Bill is not concerned with matters of that kind. It is not founded on Resolutions of the Committee of Supply but upon Resolutions in the Committee of Ways and Means. That means that the object of the Finance Bill is to find money to meet the expenditure which Parliament has sanctioned, is about to sanction or will sanction, in accordance with Estimates presented by the Chancellor of the Exchequer in his Budget for the year.
The hon. Member will see, therefore, that to attempt to extend the Finance Bill into a means of deciding upon certain additional expenditure relating to additional funds for purposes of—I think the words of the Amendment are—"social needs"—

Mr. Smith: A social security fund—

The Chairman: Yes, to be applied to social needs; that is quite outside the scope of the Finance Bill, and would be raising a matter which should be dealt with in an altogether different manner than matters in the Finance Bill which must be dealt with by means of a Resolution in the Committee of Ways and Means. The matter proposed, on the other hand, must be dealt with by legislation and in Committee of Supply.

Mr. Aneurin Bevan: I gather that it would be competent for an hon. Member to oppose the Clause and to suggest that these moneys, instead of being used to wipe off the National Debt, should be used and held in suspense; that an argument would not be admitted addressed to the Committee as to the manner in which these moneys could immediately be used but that it would be in order to suggest that Parliament might at some time or other, in its wisdom, devote those moneys to other purposes than the purposes of the National Debt; and to indicate what those purposes might be.

The Chairman: An hon. Member who embarked upon that line of argument would not be allowed to get very far. This is the kind of case to which I have referred again and again. It is one of those cases in which an hon. Member may be entitled just to refer to a matter but certainly not to argue it or to discuss it.

8.54 p.m.

Mr. Batey: I want to thank you, Sir Dennis, for coming to the Chair. Some of us are very keen on this Amendment and


we naturally thought that it would be in order. I understand your Ruling to be that the Amendment is not itself out of order but that it is out of order because the new Clause that we proposed to move later on is out of order.

The Chairman: The hon. Member is not quite correct. I said that it might not by itself be out of order if it were complete, but it is not complete, and, therefore, by itself it is out of order.

Mr. Batey: What I still understand is that, if the proposed new Clause had been differently worded, you would have been prepared to allow this Amendment to be discussed to-night —

The Chairman: The hon. Member will forgive me for interrupting him, but I cannot conceive of any way in which it could have been differently worded so as to come into order.

Mr. Batey: We are very sorry, because we believe that this money, instead of going to the Exchequer, should be earmarked for old age pensions. We will be perfectly frank about that.

The Chairman: That is the very thing that cannot be done in the Finance Bill.

Mr. Gallacher: You have said that the words of the Amendment are not themselves out of order, but that the Amendment is incomplete. Surely, if it is not out of order to propose in this Amendment that there should be a Social Security Fund, it should be possible to draft a short Clause that would cover the maintenance of that Social Security Fund, say at the disposal of the Chancellor of the Exchequer. Surely such words could be found if there is already agreement that the proposal to set up a Social Security Fund is not in itself out of order, but is merely incomplete.

The Chairman: I have just said that I cannot conceive of anything which would have made it in order, and I am strengthened in that view by the title which hon. Members propose to give to that particular fund. Even if it were otherwise, the fact remains that there is not anything on the Order Paper that would make the Amendment complete and in order, and, therefore, it must be out of order.

Motion made, and Question proposed:
That the Clause stand part of the Bill.

8.58 p.m.

Mr. E. Smith: First of all I want to thank you, Sir Dennis, for the way in which you have dealt with the matter we have just been discussing. Having said that, I want to protest against the payment of this sum of £1,500,000 into the Exchequer in this way. I can visualise this position: Suppose that some wealthy generous people in this country decided that they wanted to make a gift to the Exchequer, perhaps of millions of pounds, in the way in which gifts have been made to philanthropic institutions or hospitals. If that were done, I contend that such sums should not go into the pool in this way, but that Parliament should have the opportunity of deciding for what purpose the gift should be used. I would say to Members in all quarters of the House that there is no more urgent and important question than the question which has been ruled out of order. If people were more familiar with the way in which our mothers and fathers are having to live on 10s. a week, with the increased cost of living and the increased mechanisation and all that it means, I am convinced that Members of the House would be more interested in the problem than they are. I am pleased to notice that interest in this matter appears to be growing among hon. Members in all parts of the House —

The Chairman: I hope that the hon. Member is not going to pursue the matter. I have indicated what would be in order.

Mr. Smith: I quite appreciate that, and shall endeavour to keep within the limits of order as far as I possibly can. I am satisfied with having raised the problem, and I hope my view will be supported by other Members, in order that more interest may be stimulated in the question.

9.1 p.m.

Mr. Bevan: There is a point of substance in what my hon. Friend has said. Here are sums of money which accumulate to the credit of the National Debt Commissioners and which the Clause proposes should be devoted to reduction of the National Debt. The sum in itself is obviously not very substantial, and could not by itself be devoted to any wide and large purpose such as that indicated in the Amendment which has been ruled out of order, but, supposing the House


were to say that it is pot wise to liquidate and disperse these funds, but that it would be far better that they should be allowed to accumulate, if they were allowed to accumulate over a period of years there might be a discussion in Parliament and an indication on the part of the Government or of Members of the House of Commons that these funds, having been accumulated, should be devoted to a certain purpose.
One does not know why these balances exist at the moment. It may be because people forget that they hold stock, or because they have died and their relatives have not claimed the money; or it may be that some people holding national stock developed consciences and did not want to claim the interest. Suppose that Parliament said that in its judgment this fund ought to be devoted to some purpose which would be more attractive than merely attempting to wipe out a portion of this colossal debt, and that it should be used as the beginning of a fund for the increase of old age pensions. I am not suggesting that that is the use to which the money should be put, but the suggestion might be made. At once, if it became clear to people in the country that these unclaimed moneys were going to be used for some purpose which commanded general approval, larger numbers of people might develop more sensitive consciences and might leave larger sums of money unclaimed. I can imagine a campaign in the country on behalf of any worthy recipients of these moneys which might so stir the country as to lead to very large sums being left unclaimed, on the understanding that they would be used for these purposes.
The Chancellor of the Exchequer has told us, and hon. Members on the other side of the House have told us, that the Government could not afford an increase of old age pensions. There may be many people in this country who are anxious to prove that there is enough money in the country for that purpose by not claiming their share of the outgoings on national loans, and they might say to the Government that they were perfectly willing that a certain percentage of their claims on the National Debt should remain unclaimed provided that the money was used for the purpose of increasing old age pensions. Indeed, it would afford

an excellent test of how much genuine and substantial support there is in the country for such a proposal on the part of people who, I believe, would be prepared to pay higher taxes in order to further it, or not to take as much revenue as they are having now if the money so sacrificed were used for such purposes as old age pensions.

The Chairman: The hon. Member must remember that this Clause only provides for the payment of money from this particular fund into the national Exchequer. He may discuss the advisability or otherwise of doing that, but, beyond a bare reference, he must not discuss other methods of using the money.

Mr. Bevan: I agree that it would be highly improper and discourteous of me, and entirely contrary to the spirit in which we have conducted this matter, to argue the merits of increasing old age pensions at present in this country. All I would argue is that if the fund were allowed to accumulate, its very existence would suggest means to which it might be devoted, and among the uses that might be suggested are old age pensions, widows' pensions, pensions for spinsters, and things of that sort. I submit, as a point of some substance, that as soon as it became known that it might be used for that purpose, there might be an enormous increase in the amount of the fund. So it seems an injudicious and prodigal thing to disperse into the Exchequer funds which, if allowed to accumulate, might be used for better purposes than merely reducing this mountain of debt by £1,000,000 or so.
What happened during the War? I believe it is true that a very large number of people during the War refused to take payment on the loans they had made to the State, because they considered they had made fortunes out of war necessities and ought not to be recipients of interest on such money as they had lent to the State. If war broke out millions of pounds would be made in profits, and it might be that a large number of people, representing vast sums of money, would be prepared to leave their revenues unclaimed if they knew that the money was to be used for a purpose of this sort. But, otherwise, the money will merely pass into the amorphous national accounts, and nobody will be given any additional inducement to leave it unclaimed. I suggest that because of these


circumstances and the possibilities involved if a war broke out, because we know that large numbers of people are only too anxious to devote their incomes to worthy purposes if they could find them, it would be desirable to keep this fund in existence.

9.I0 p.m.

Mr. Gallacher: I should like to say a word or two in support of the arguments which have been put forward for maintaining this fund and doing everything possible to build it up in the hands of the National Debt Commissioners, instead of allowing it to be handed over to the Treasury. At any time some question might arise for which a fund of this sort would be immediately required. In this Finance Bill we are providing for a most extraordinary accumulation of money for the Government's purposes, yet if the House of Commons had to make a sudden decision that called for immediate realisation of a given amount of money, there would be the greatest difficulty in getting that money, for the simple reason that there has never been any attempt to create a fund of this kind. We know that many of the most deserving people of this country are going on short rations. Hon. Members opposite will seriously argue that the money cannot be found to meet the needs of these people. I am prepared to assert that Pharaoh had a heart as soft as butter in comparison with the heart of the Chancellor of the Exchequer. If at any time one raises with the Chancellor a question that affects some of these people who are in the most urgent need, his reply is that he has no money. If he has no money for that purpose, why does he not, instead of sapping this fund, help it to grow?
This Clause should not be in the Bill. I am certain that if the matter were left to a free vote of the House of Commons, there would be an overwhelming majority in favour of an increase in old age pensions. Here is a Finance Bill the like of which has never before been seen in this country, and in the middle of it there is this provision by which the Government are to dig into the National Debt Commissioners' account for conscience money. But if this money was accumulated and used for a valuable social purpose, such as that which has been suggested from these benches, of increasing old age pensions, there would be people

in all parts of the country ready to give up their dividends, or ready at all times to give up a certain share of their stolen wealth in order to soothe their consciences by helping what everybody recognises to be a really good and deserving cause. It is of the greatest importance, in view of the rock-like, deadly attitude of the Government when it comes to the question of getting money for social needs, that we should try to build up an accumulation of money somewhere or other upon which we could rely for these purposes. We should either get rid of Clause 25, and provide an opportunity for accumulating money, or get rid of the Government.

Mr. Quibell: Get rid of the Government then.

Mr. Gallacher: I am certain that if the direct needs which we have suggested are to be met and the people are to be considered at all—which they are not as far as the Finance Bill is concerned—the second alternative would meet the heart's desire of the best people of this country, namely, to get rid of the Government.

9.17 p.m.

Mr. Tinker: We are entitled to some explanation of this matter from the Financial Secretary to the Treasury. Clause 23 deals with the amount allowed for meeting the National Debt charges. A total of£230,000,000 is allowed for that purpose, and in Clause 25 we are told that a certain amount can be claimed from time to time from the National Debt Commissioners from unclaimed dividends. Are we not entitled to know what resources they have from unclaimed dividends? I did not know that there was any unclaimed money. If there is a vast amount, it is time it was brought into use and not allowed to lie idle. We are told that £1,500,000 can be claimed from this fund. We on these benches constantly ask that certain money ought to be found for other purposes, and we are just as constantly told that it is impossible, owing to national stringency and the great calls for other purposes, for any extra money to be found. Anybody who examines Clause 25 will get the idea that there is a vast amount of money somewhere. We are anxious to know the total resources of this fund. If the resources are sufficiently large to meet the particular


purpose for which we are anxious to get hold of it, we might be able to stir the imagination of the House to agree with us. I believe that it is the general opinion in all parts of the Committee that, if there was money at all available for the purpose I have in mind, but which purpose I will not mention, that money would readily be given for that purpose. If the Financial Secretary can tell us what resources we have, we may later on be able to put down a new Clause providing for some of the money to be used in other directions. We are entitled to that information. We are prepared to carry this Debate a long way to-night unless we get to know something definite. We expect some answer before the Clause is finally passed. If that answer is satisfactory, we shall let the Clause go through, but if it is not, we shall ask the Committee to divide against it in order to show the feeling that exists on this matter.

9.21 p.m.

Mr. Silverman: It appears that apparently there is a fund in existence, but no one appears to know whose money it is. It seems to be money owing by the State to somebody—money which has not been claimed. If there is one thing that is perfectly clear about this matter, it is that the money does not belong to the State. This is money which the State has contracted to pay to somebody. It is not the moral right of the State to retain it for its own purposes. No private trustee would be entitled to do it. I understand that in banks up and down the country there are from time to time large sums in the way of unclaimed balances, and we would not propose at any time to allow a bank to put its unclaimed balances into a fund for distribution to its shareholders. Yet we feel ourselves to be entitled, if we are to follow the Treasury in this matter, when we have money belonging to other people and nobody comes forward to claim it, to use it for the general purposes of the community. We have no moral right to use it for our general purposes at all. This is a sovereign Assembly and no doubt it can decide to do anything it likes with anybody's money or property at any time, and I suppose that there is no legal power to prevent it from taking, not merely unclaimed dividends, but claimed dividends as well.
If we allowed the money to accumulate, we would have in the background a sum of money on which we could fall back from time to time to meet purposes which appeal to our sense of charity and pity, and to carry out what is due to the humbler and more hard-pressed members of the community. If we found it impossible to pay the money to the rightful owners, or if they did not choose to claim it, we could use it, if we chose, for the benefit of people who needed it more than the owners. But in no case are we entitled to put it into our own pockets and treat it as our own.

9.24 p.m.

Mr. Garro Jones: I hope that the Financial Secretary to the Treasury will be good enough to give us an answer. We are engaged in presenting a very serious problem for his consideration, which is not limited to the amount of unclaimed balances in the hands of the National Debt Commissioners. It is obvious that the amount of unclaimed balances in the hands of the National Debt Commissioners is a mere fraction of the unclaimed balances in the hands of other financial institutions. It would not be in order for me to embark upon a prolonged discussion of that matter, but if there is at least £1,500,000 in the hands of the National Debt Commisisoners it is pertinent to ask how much in the way of unclaimed balances is in the hands not only of the joint stock banks but the savings banks and all those depositories of public money throughout the State. Let us examine for a moment the principles which ought to govern us in the allocation of these unclaimed balances, because the principle is the same whether the money is in the hands of the joint stock banks or the Treasury.

The Deputy-Chairman: I am afraid that we cannot discuss the principle of unclaimed balances of joint stock banks. That is outside the Clause.

Mr. Garro Jones: I recognise the validity of that remark, but I have now concluded my remarks about the joint stock banks and was about to discuss the destination of unclaimed balances, which is the same thing whether they are in the hands of the State or of any other institution. What is an unclaimed balance? It is nothing more or less than lost property. It has been deposited in a certain place


and by reason of a variety of accidents it has become lost in those hands in the same way as if I left an umbrella in a tube train. There is no other valid principle which we can apply in dealing with those unclaimed balance. If I, finding an umbrella in a tube train, fail to return it to the proper quarter, I am guilty of a crime known as stealing by finding. It is precisely this crime, looked at from a higher ethical point of view, which the House of Commons is being asked to commit at the instigation of the Government. I really think that unless this money is to be allocated definitely to the whole of the community, irrespective of how much taxation they pay on the basis of need, then we are committing an unethical principle in passing this Clause.
Another matter is whether in truth this is money which ought properly to be taken into income account. It appears to me that this is not legitimate income at all. It is neither more nor less than capital, and as such it ought to be applied, if the State is going to establish a claim to it, to wiping out the National Debt and not in application to the current revenue of the year. We are entitled to some observation from the Financial Secretary to the Treasury. This is a subject on which the greatest secrecy is always observed. From time to time there have been powerful agitations by the Press and the public for the disclosure of these unclaimed balances, but always the Government of the day has turned a deaf ear to the appeal. It is time that the House of Commons had some light thrown on the situation, and I hope that the Minister will not shirk his responsibility.

9.29 p.m.

Captain Crookshank: There is certainly no desire not to shed light on it, and, in fact, I did shed light on it on the 3rd May. If hon. Members had been here at the time the Budget Resolutions were passed they would have an explanation on this by myself. I have nothing really to add to what I said on that occasion. I would point out to the Committee that the only effect of voting against this Clause would be that the money in this unclaimed dividends account would stay where it is and accumulate a little more during the next year. On the other hand, if the proposal in the Clause is accepted, there shall be transferred as and when the Treasury request £1,500,000 which is not required in the account for the purpose of

the account; it would be paid into the Exchequer for the purpose of the finances of the year. As the House, on the Report stage of the Resolutions, accepted the principle, I hope that the Committee, on this Bill, will take exactly the same view.
I should have liked to have controverted some of the statements which would have been in order if the ruling had not been given, but that is not permitted to me on this occasion either. We shall have to reserve what we had to say until some other time. I do not understand what the hon. Gentleman the Member for Nelson and Colne (Mr. Silverman) meant just now when he said that there was no moral right to use this money for the general purpose of the community. If there is no moral right to use it for the general purpose of the community, I am not sure what moral right there is to use it for a specific purpose.

Mr. Silverman: If you have in your possession money which is not yours, there may be a very different moral aspect if you proceed to use it for your own purpose, on the one hand or if, on the other, you proceed to use it for same philanthropic or altruistic purpose.

Captain Crookshank: It is not mine either, and we are going to use it towards the general expenditure of the State.

Mr. Garro Jones: Is this the income from a capital sum; is this a part of the capital sum, or is it the whole of the sum of unclaimed balances in this branch of the national credit?

Captain Crookshank: All that was said before. Perhaps I may explain what this sum represents. Certain dividends on Government stocks are not claimed by the stockholders. After a certain period, generally five years, those sums are transferred to the National Debt Commissioners, who are liable to repay such dividends if and when they are claimed. Experience over a long period of years has shown that nothing like those claims are ever paid. The National Debt Commissioners keep an account, and what is not required for the purpose earns money by being lent, and in course of time it comes to a sum in excess of what might be considered reasonable liability. It is, relatively speaking, only quite a small sum with which we are now concerned. The position of the account at the end of the last financial year on 31st March


showed assets to the market value of £2,276,000. If the hon. Gentleman considers that this is a crime from the higher ethical aspect, if he looks at what I said on the previous occasion he will observe that the first time that a transaction of this kind took place, the transfer was at the time of Mr. Gladstone.

9.35 P.m.

Mr. Batey: The Financial Secretary has tried to explain the Clause, but there is this difference between to-night and when the question was before us on 3rd May. On 3rd May we had not our attention fixed on the Clause as we have had it fixed to-night. We have had our attention fixed upon it more particularly because we could not move our Amendment. All we can do is to speak on the Clause itself. I am not clear about some of the things which the Financial Secretary has sought to explain. He talked about the National Debt Commissioners waiting five years for unclaimed dividends. Why five years? Is not the ordinary term six years? Why are the Commissioners able to claim these sums at the end of five years? What struck me was that the Chancellor of the Exchequer is seeking power to take sums not exceeding £1,500,000, but if I rightly understood the Financial Secretary he said that there was a sum of over £2,000,000 lying with the Commissioners. If that be so, why is the Chancellor of the Exchequer satisfied with £1,500,000?
I disagree with the Clause and am strongly opposed to it, and I hope that there will be a Division, so that we may register our vote against the Clause. I am glad, however, that the Clause is there, because it has directed attention to money that we think the Chancellor of the Exchequer should not take. It should be left for other purposes. The Clause has served to bring forward a new idea, that of a social security fund. If this Clause had not been in the Bill, we should not have thought of any such thing as a social security fund.

The Deputy-Chairman: That is one of the things that the hon. Member is not entitled to discuss.

Mr. Batey: I am not discussing it; I was only saying that it is a new idea. It is surprising how new ideas grow. I

maintain that the Chancellor of the Exchequer should not take this £1,500,000 and apply it to revenue purposes. When the question of Death Duties was first raised, I understand that there was considerable doubt whether that money should be taken for revenue purposes. That, however, is settled, and we cannot get away from it; but here is an opportunity for a new start with a new idea in regard to the use of these unclaimed dividends. Why should the Chancellor of the Exchequer claim these dividends up to the amount of £1,500,000? The Financial Secretary says that if the Chancellor of the Exchequer does not take the money it will be left where it is. My reply is that it would not be left there very long, because we should soon teach the Financial Secretary the purposes to which the money might be put. Some of my colleagues have stated that if this money could be devoted to charitable purposes, the idea would develop rapidly. People are not hard-hearted. Here are two announcements:
The Chancellor of the Exchequer acknowledges receipt of £18 from J.K.L.
The Board of Inland Revenue acknowledges receipt of £5 conscience money from A.E.
Some people have consciences. Everybody is not hard-hearted and close-fisted. If we could leave this money where it is until we could have time to develop a scheme to which the money might be put, that would be much better than the Chancellor of the Exchequer taking it. This money could be used as a nucleus of a fund to which people with money could subscribe, and we could use the fund for a purpose of real value to the country-It would be far better to leave the money where it is at the present time. If the Chancellor of the Exchequer wants money, we can tell him where he can get it. If he says that he cannot balance his Budget unless he gets this money, I would advise him to reduce the Surtax level to £1,500. He could get his money in a hundred different ways. Therefore, I say, leave this money where it is.

Mr. Gallacher: Does the Financial Secretary not agree that a fund of this kind would be very desirable for those people who have sympathy with social reform, in view of the way that his Government have shown their lack of sympathy for the old age pensioners.

9.44 p.m.

Mr. Bevan: The financial Secretary said that the amount of money was comparatively small. It might be much larger if its destination was more practical; in other words, if it was possible for the money to be used for purposes which would appeal to the citizens. I know he cannot answer on this point, but is he not aware that this sum of £1,500,000 is more than his Government provided for the distressed areas in the first year of the Distressed Areas Bill.

If, therefore, £1,500,000 was regarded as more than adequate to deal with that problem, he might leave it where it is for the present, because there are many people in the distressed areas who would be far worthier recipients of this money than using it for the relief of the taxpayer. I hope, therefore, my hon. Friends will vote against the Clause.

Question put, "That the Clause stand part of the Bill."

The Committee divided: Ayes, 189; Noes, 102.

Division No. 202.]
AYES.
[9.45 p.m.


Acland-Troyte, Lt.Col. G. J.
Hannah, I. C.
Reid, W. Allan (Derby)


Allen, Col. J. Sandeman (B'knhead)
Harris, Sir P. A.
Rickards, G. W. (Skipton)


Apsley, Lord
Harvey, T. E. (Eng. Univ's.)
Ropner, Colonel L.


Aske, Sir R. W.
Haslam, Henry (Horncastle)
Rosbotham, Sir T.


Astor, Viscountess (Plymouth, Sutton)
Heilgers, Captain F. F. A.
Ross Taylor, W. (Woodbridge)


Baillie, Sir A. W. M.
Hely-Hutchinson, M. R.
Rowlands, G.


Balfour, G. (Hampstead)
Hepworth, J.
Royds, Admiral Sir P. M. R.


Balniel, Lord
Higgs, W. F.
Ruggles-Brise, Colonel Sir E. A.


Barrie, Sir C. C.
Hogg, Hon. Q. McG.
Salman, Sir I.


Beaumont, Hon. R. E. B. (Portsm'h)
Holdsworth, H.
Salt, E. W.


Beechman, N. A.
Holmes, J. S.
Samuel, M. R. A.


Bower, Comdr. R. T.
Hopkinson, A.
Sandeman, Sir N. S.


Boyce, H. Leslie
Horsbrugh, Florence
Sanderson, Sir F. B.


Braithwaite, J. Gurney (Holderness)
Howitt, Dr. A. B.
Sandys, E. D.


Briscoe, Capt. R. G.
Hudson, Capt. A. U. M. (Hack., N.)
Schuster, Sir G. E.


Brocklebank, Sir Edmund
Hutchinson, G. C.
Shepperson, Sir E. W.


Brooke, H. (Lewisham, W.)
Inskip, Rt. Hon. Sir T. W. H.
Simon, Rt. Hon. Sir J. A.


Browne, A. C. (Belfast, W.)
Jarvis, Sir J. J.
Sinclair, Col. T. (Queen's U. B'lf'st)


Burgin, Rt. Hon. E. L.
Jennings, R.
Smiles, Lieut.-Colonel Sir W. D.


Cazalet, Capt. V. A. (Chippenham)
Joel, D. J. B.
Smith, Bracewell (Dulwich)


Chapman, A. (Rutherglen)
Jones, Sir G. W. H. (S'k N'w'gt'n)
Smith, Sir R. W. (Aberdeen)


Cobb, Captain E. C. (Preston)
Jones, Sir H. Haydn (Merioneth)
Smithers, Sir W.


Colfox, Major Sir W. P.
Jones, L. (Swansea W.)
Somerset. T.


Conant, Captain R. J. E.
Keeling, E. H.
Somervell, Rt. Hon. Sir Donald


Cook, Sir T. R. A. M. (Norfolk, N.)
Kerr, Colonel C I. (Montrose)
Somerville, Sir A. A. (Windsor)


Cooke, J. D. (Hammersmith, S.)
Lamb, Sir J. Q.
Spens. W. P.


Cox, H. B. Trevor
Law, R. K. (Hull, S.W.)
Stanley, Rt. Hon. Oliver (W'm'ld)


Crooke, Sir J. Smedley
Lees-Jones, J.
Stewart, J. Henderson (Fife, E.)


Crookshank, Capt. Rt. Hon. H. F. C.
Leech, Sir J. W.
Storey, S.


Cross, R. H.
Leighton, Major B. E. P.
Stourton, Major Hon. J. J.


Crowder, J. F. E.
Lewis, O.
Strauss, H. G. (Norwich)


Cruddas, Col. B.
Liddall, W. S.
Strickland, Captain W. F.


Davidson, Viscountess
Little, Sir E. Graham-
Stuart, Rt. Hon. J. (Moray and Nairn


Denman, Hon. R. D.
Little, J.
Sutcliffe, H.


Despencer-Robertson, Major J. A. F.
Locker-Lampson, Comdr. O. S.
Tasker, Sir R. I.


Dodd, J. S.
Loftus, P. C.
Tate, Mavis C.


Dugdale, Captain T. L.
Mabane, W. (Huddersfield)
Taylor, C. S. (Eastbourne)


Duggan, H. J.
McCorquodale, M. S.
Thomson, Sir J. D. W.


Edge, Sir W.
Macdonald, Capt. P. (Isle of Wight)
Thornton-Kemsley, C. N.


Ellis, Sir G. 
Manningham-Buller, Sir M.
Touche, G. C.


Elliston, Capt. G. S.
Margesson, Capt. Rt. Hon. H. D. R.
Tryon, Major Rt. Hon. G. C.


Emery, J. F.
Markham, S. F.
Turton, R. H.


Emrys-Evans, P. V.
Marsden, Commander A.
Wallace, Capt. Rt. Hon. Euan


Errington, E.
Meller, Sir R. J. (Mitcham)
Ward, Lieut.-Col. Sir A. L. (Hull)


Erskine-Hill, A. G.
Mills, Major J. D. (New Forest)
Ward, Irene M. B. (Wallsend)


Evans, Colonel A. (Cardiff, S.)
Morgan, R. H. (Worcester, Stourbridge)
Wardlaw-Milne, Sir J. S.


Evans, D. O. (Cardigan)
Morris, J. P. (Salford, N.)
Water house, Captain C.


Fleming, E. L.
Morrison, G. A. (Scottish Univ's.)
Watt, Lt.-Col. G. S. Harvie


Fremantle, Sir F. E.
Morrison, Rt. Hon. W. S. (Cirencester)
Wayland, Sir W. A


Furness, S. N.
Munro, P.
Webbe, Sir W. Harold


Fyfe, D. P. M.
Nall, Sir J.
Wells, Sir Sydney


George, Major G. Lloyd (Pembroke)
Neven-Spence, Major B. H. H.
White, H. Graham


George, Megan Lloyd (Anglesey)
O'Connor, Sir Terence J.
Wickham, Lt.-Col. E. T. R.


Gluckstein, L. H.
Owen, Major G.
Williams, Sir H. G. (Croydon, S.)


Goldie, N. B.
Palmer, G. E. H.
Windsor-Clive, Lieut.-Colonel G.


Gower, Sir R. V.
Perkins, W. R. D.
Winterton, Rt. Hon. Earl


Grant-Ferris, Flight-Lieutenant R.
Pickthorn, K. W. M.
Womersley, Sir W. J.


Gridley, Sir A. B.
Ponsonby, Col. C. E.
Wragg. H.


Griffith, F. Kingsley (M'ddl'sbro, W.)
Radford, E. A.
Wright, Wing-Commander J. A. C.


Grimston, R. V.
Ramsbotham, Rt. Hon. H.
York, C.


Guest, Maj. Hon. O. (C'mb'rw'll, N.W.)
Ramsden, Sir E.
Young, A. S. L. (Partick)


Gunston, Capt. Sir D. W.
Rathbone, J. R. (Bodmin)
TELLERS FOR THE AYES.—


Hacking, Rt. Hon. Sir D. H
Reed, A. C. (Exeter)
Major Sir James Edmondson and Captain McEwen.


Hambro, A. V.
Reed, Sir H. S. (Aylesbury)





NOES.


Adams. D (Consett)
Graham, D. M. (Hamilton)
Messer, F.


Adams, D. M. (Poplar, S.)
Green, W. H. (Deptford)
Milner, Major J.


Adamson, Jennie L. (Dartford)
Grenfell, D. R
Morrison, Rt. Hon. H. (Hackney, S.)


Adamson, W. M.
Griffiths, J. (Llanelly)
Naylor, T. E.


Alexander, Rt. Hon. A. V. (H'lsbr.)
Hayday, A.
Noel-Baker, P. J.


Ammon, C. G.
Henderson, J.(Ardwick)
Oliver, G. H.


Anderson, F. (Whitehaven)
Henderson, T. (Tradeston)
Paling, W.


Banfield, J. W.
Hills, A. (Pontefract)
Parkinson, J. A.


Barnes, A. J.
Hollins, A.
Pearson, A.


Batey, J.
Hopkin, D.
Price, M. P.


Bellenger, F. J.
Isaacs, G. A.
Pritt, D. N.


Benson, G.
Jagger, J.
Quibell, D. J. K.


Bevan, A.
Jenkins, A, (Pontypool)
Richards, R. (Wrexham)


Broad, F. A.
Jenkins, Sir W. (Neath)
Ridley, G.


Bromfield, W.
Jones, A. C. (Shipley)
Riley, B.


Brown, C. (Mansfield)
Kennedy, Rt. Hon. T.
Robinson, W. A. (St. Helens)


Buchanan, G.
Kirby, B. V.
Saxton, T. M.


Burke, W. A.
Kirkwood, O.
Silverman, S. S.


Charleton, H. C.
Lathan, G.
Simpson, F. B.


Chater, D.
Lawson, J. J.
Smith, T. (Normanton)


Cooks, F. S.
Leach, W.
Stephen, C.


Collindridge, F.
Lee, F.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Cove, W. G.
Leonard, W.
Thurtle. E.


Cripps, Hon. Sir Stafford
Leslie, J. R.
Watkins, F. C.


Daggar, G.
Logan, D. G.
Watson, W. McL.


Dalton, H.
Lunn, W.
Westwood, J.


Davies, R. J. (Westhoughton)
Macdonald, G. (Ince)
Whiteley, W. (Blaydon)


Davies, S.O. (Merthyr)
Mc Entee, V. La T.
Williams, E. J. (Ogmore)


Dunn, E. (Rother Valley)
McGhee, H. G.
Williams, T. (Don Valley)


Ede, J. C.
McGovern, J,
Windsor, W. (Hull, C.)


Edwards, A. (Middlesbrough E.)
MacLaren, A.
Woods, G. S. (Finsbury)


Edwards, Sir C. (Bedwellty)
Maclean, N.
Young, Sir R. (Newton)


Gallacher, W.
Mainwaring, W. H.



Gardner, B. W.
Marshall, F.
TELLERS FOR THE NOES.— 


Garro Jones, G. M.
Mathers, G.
Mr. Tinker and Mr. Bills Smith.


Question put, and agreed to.

Clauses 26 to 29 ordered to stand part of the Bill.

NEW CLAUSE.—(Reduction of duty on certain mechanically propelled vehicles used for agricultural purposes.)

(1) In paragraph 4 of the Second Schedule to the Finance Act, 1920 (which, as amended by the Seventh Schedule to the Finance Act, 933, prescribes the rate of duty payable under Section thirteen of the Finance Act, 1920, in respect of the mechanically propelled vehicles therein mentioned), for sub-paragraph (a) there shall be substituted the following sub-paragraph.—

(a) locomotive ploughing engines, tractors, agricultural tractors and other agricultural engines, which are not used on roads for hauling any objects except as follows, that is to say.—

(i) for hauling their own necessary gear, threshing appliances, farming implements, or supplies of water or fuel required for the purposes of the vehicle or for agricultural purposes;
(ii) for hauling from one part of a farm in the occupation of the person in whose name the vehicle is registered under the Roads Act, 1920, to another part of that farm, agricultural produce of, or articles required for the farm.… 5s. od.

(2) In Sub-section (7) of Section two of the Finance Act, 1935 (which excepts from the provisions of that Section withdrawing the rebate on heavy oils used as fuel for

mechanically-propelled vehicles, the vehicles specified in sub-paragraphs (a), (b) or (c) of the said paragraph (4), the reference to the said sub-paragraph (a) shall be construed as a reference to the sub-paragraph substituted there for by this Section—[Captain Wallace.]

Brought up, and read the First time.

9.53 p.m.

The Minister of Transport (Captain Wallace): I beg to move, "That the Clause be read a Second time."
Hon Members will be glad to hear that we start the new Clauses with a concession by the Chancellor of the Exchequer. The object of this new Clause is to allow farmers greater freedom in the use to which tractors chargeable to duty at the nominal rate of 5s. can be put. At the present time agricultural tractors, if they are to qualify for the 5s. rate, can be used on public roads only for the haulage of their own necessary gear, threshing appliances, farming implements and the like. Farmers who own tractors are an increasing number. They use tractors to-day for work which was previously done by horses, and they are bound at present by the restrictions applicable to the 5s. class, but the concession made in the new Clause provides in effect that tractors taxed at 5s. may now also be used for the haulage of farm produce and


farming requisites, such as manure and feeding stuffs, on public roads between different parts of the same farm. It is a concession which will be specially valuable to the farming community at harvest and other busy times.
I am somewhat surprised at the hilarity of hon. Members opposite at any concession which is made to the hard-hit farming industry. Sub-section (2) of the new Clause clarifies the position with regard to the exemption of the oil fuels used for these vehicles from the 9d. tax on oil. Section (2), Sub-section (7) of the Finance Act, 1935, allows a rebate of 8d. in the 9d. tax on oil for oils used in these particular agricultural machines. Sub-section (2) of this new Clause is designed to make it quite clear that the fuel used for the propulsion of the vehicles coming within this revised classification will still be subject to the lower rate. I hope that with this explanation the Committee will agree to the new Clause.

Mr. Bevan: I gather that these vehicles would not be used by farmers during the whole year, but only at certain times. Would farmers be able to sub-let or to hire out these vehicles to other persons who would use them for ordinary road purposes, and in that case, would the vehicles be exempted?

9.56 p.m.

Mr. Alexander: I had intended to say something on the point that has been raised by my hon. Friend, but before doing so, I should like to comment upon this generosity of the Government, which seems to be in contemplation of the early approach of the General Election. [Interruption.] I think the number of concessions and grants which the Government have been making during the last few months to their great standby, the rural constituencies, have made that fairly plain. From the way in which they have been pouring out money in this direction, I think it is fairly patent what their political views on the subject are. As to the point raised by my hon. Friend the Member for Ebbw Vale (Mr. Bevan), I think it is well known, as indeed it was explained by the Minister of Agriculture when he was introducing his proposals concerning tractors recently, that a large proportion of the tractor work done on farms is not done by vehicles owned by the farmers, but by hired vehicles. Those

who have an interest in rural districts as a result of residence there from time to time, and who watch what happens there, know that a very large part of this work is done by regular agricultural tractor people, who hire out the vehicles and keep gangs of men to send round with them. It is obvious that this type of vehicle will do a good deal of travelling on the roads from farm to farm when they are not engaged in hauling farm implements from different parts of the farm itself. I should be interested to know exactly how the officials responsible for the collection of the horse-power tax in connection with such vehicles will distinguish between the various periods during which the tractors are in use, when they are travelling on hire between the farms, and when they are working on the farms. I think it will be very difficult to avoid the complete misuse of the concession that is being made, unless the Minister of Transport can devise some machinery that will effectively prevent such misuse. We have had no explanation on this matter from the Minister of Transport, and I feel that we ought to have one before we grant him the new Clause.

9.59 p.m.

Mr. Turton: There are one or two drafting points that I want to put to the Minister of Transport. Under the Finance Act, 1936, a concession was made in respect of agricultural vehicles if they were being used to pass from one piece of land in the occupation of a farmer to another piece of land in his occupation, and if the distance did not exceed in the aggregate six miles in any calendar week they were exempted from all duty. I want to ask my right hon. and gallant Friend whether the effect of this new Clause will be subject to that provision in the Finance Act, 1936, or whether it will take away the exemption from liability to the horse-power tax in that case. A great many fanners do not use tractors for the purposes of going on the road, and therefore, they ought not really to come within the road duty at all.
Valuable as the concession given in the new Clause will be, I rather fear that its value will be largely diminished by the fact that the word "farm" is used. Many farmers have two adjacent farms which they have to farm in order to make farming remunerative. I have often


heard the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) say that the unit of the farm is too small, and I gather that the Co-operative Society believe in having larger farms and for that purpose take in more than one farm. For these reasons, I think it would be more helpful if a term such as "land in the occupation of a single occupier" could be used. If the new Clause were limited merely to "farm," it would mean that directly a farmer brought a tractor from one farm in his occupation to another farm in his occupation for the purpose of doing some ploughing, he would have to pay a higher rate of duty. These are drafting points, but I should be grateful if my right hon. and gallant Friend would look into them either now or between now and the Report stage, and see whether this Clause fits in with Section 12 of the Finance Act, 1936.

10.2 p.m.

Sir P. Harris: Yesterday we spent many desperate hours in struggling to get concessions with regard to motor cars used for commercial and other purposes, and the right hon. Gentleman the Chancellor of the Exchequer firmly resisted. I am glad that on this occasion, unlike yesterday, we have present the Minister of Transport. If he had been here yesterday, we might have been more successful in our efforts. [Interruption.] In any case, he did not take an active part in the proceedings, but kept modestly in the background. We are grateful for the concession that is now being given, because it establishes the sound principle that this tax is a tax on industry and on transport in one form and another. We do not intend to oppose this concession. It will help agriculture, and it is sound in principle; and it is a principle that could well be extended to other industries. I should like to ask what will be the cost of it. Yesterday, the Chancellor of the Exchequer was telling us that certain concessions would involve enormous sums. I should like to know whether a large sum is involved in this concession, and whether it represents a large financial contribution to agriculture. In the meantime, in principle we approve of this common-sense proposal. 10.4 p.m.

Sir Joseph Lamb: I should like to say how much I appreciate the concession

given in the new Clause. In reply to the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris), the concession will not cost anything. It is really a clarification of the conditions under which these tractors can be used in the cultivation of land. Agriculture, like other industries, is now becoming much more mechanised than it was on the old days, and the use of horses, much as we may regret it for certain reasons, is being supplanted by the use of mechanised power. Up to now there has been a great deal of uncertainty as to how much a tractor which pays this tax of 5s. can be used upon the roads in the actual work of completing the cultivation of the farm. That is to say, although it is not on the road when it is actually cultivating the land, it has to be transported from one field to another on the same farm, and of course there are certain crops and manures which have to be transported from one part of the farm to another. It has not been clear how much of this could be done with the tractor, but this new Clause has clarified the position and, much as I believe it will gratify some people, it will cost nothing while being of great value to agriculture.

10.6 p.m.

Captain Wallace: In answer to my hon. Friend the Member for Thirsk and Malton (Mr. Turton), the concession of the 1936 Act was granted to all classes of vehicles, and this Clause does not affect that in any way. As far as the wording of the Clause is concerned, it has been fully considered by the Minister of Agriculture and also by the National Farmers' Union. If any evidence is brought before me that the wording is not such as to carry out the intentions that the Chancellor of the Exchequer has in mind, I will certainly look into it before another stage. The hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris) was answered by my hon. Friend behind me. The effect of the concession on the Revenue will be negligible. It is a concession in the direction of extending the ways in which these vehicles can be used. The right hon. Gentleman the Member for Hillsborough (Mr. Alexander) discussed the question of tractors being hired out to other people. The best answer is to remind him that the principle by which the taxation of these tractors is governed is the use to which they are put and, if any particular tractor comes to be used in a


different way which is not appropriate to the class in which it is registered, it will come into a higher class of taxation.
There are four classes into which these machines can fall. There are tractors which do not go on any road at all. They do not pay anything and do not have a licence. Secondly, there is the class of tractors which do not exceed six miles on the public roads per week. They do not pay tax either. There is the 5s. class of tractors, which under the existing law are allowed to haul only their own gear and farm implements if used on public roads, and fourthly there are the agricultural tractors which come under paragraph 4 (d) of the Schedule; they pay £12 if they are not over five tons in weight unladen, and if exceeding five tons and not exceeding ten, £20. Over 10 tons they pay £20 for the first 10 tons and £2 a ton after that. If in any case a tractor is taken out of the use for which it pays a lower rate, it will immediately become liable to a higher rate of duty.

10.10 p.m.

Mr. Bevan: How do you know that? The hon. Gentleman cannot get away with that. One of these tractors has been registered for use on the farm, but its use on the farm is limited to a certain time of the year and it is lucrative for the farmer, not being able to make use of it all the year round, to let it out to certain people for use during other parts of the year, although it is still registered in the name of the person who bought it. The other man may use it for any purpose whatever. The tractor still remains in its original classification. The hon. Gentleman is too optimistic if he imagines that, immediately a farmer hires it out for general purposes, he goes to the local taxation department and offers to pay the higher tax. He does no such thing. There would need to be inspectors like blackberries in the autumn to check the practice. You can drive a tractor through the Clause. With regard to the point raised by the hon. Member for Thirsk and Malton (Mr. Turton), surely the governing words are "from one part of the farm in the occupation of the person." That is not a particular farm. If he had three or four farms he could transport the tractor from one to the other.

Mr. Turton: The Clause says "hauling from one part of the farm to another part of that farm."

Mr. Bevan: The operative words surely are that the farms are in the occupation of that person. It seems to me fantastic that the National Farmers' Union, with the resources of the Parliamentary draftsmen, have drafted a Clause which, if it is read in the way the hon. Member suggests, denies this advantage to a large proportion of the agricultural community, if indeed there is any advantage in it at all. I think a word ought to be said about the practice of consulting interests outside before things are done in this House. It is growing. Over and over again we have admissions from the Front Bench that, before Parliament is informed of certain concessions, consultations take place and interested groups of people, interested property owners of various kinds, are allowed to have their influence upon the drafting of a resolution. If we are to have this sort of consultation with all kinds of property interests outside, it seems to me that the time has arrived for the trade unions to begin to demand that they shall be taken into consultation.

Sir J. Lamb: Is there any difference between a trade union and the Farmers'Union?

Mr. Bevan: The difference is perfectly clear to the hon. Member. The fanners are represented on that side of the House and the unions on this. But the practice is growing. We had it over the Coal Bill. The coal owners were consulted time after time and the farmers are consulted now. This is merely shovelling out public money after consultation with the recipients. The hon. Gentleman started off by saying, "a concession has been made." If no concession is being made, there is no relief, and what is the point of it? The hon. Gentleman cannot say what it costs.

Sir J. Lamb: I said it did not cost anything.

Mr. Bevan: How do you know? The Minister did not say that.

Sir J. Lamb: I know because it is a fact which the Minister has corroborated. If Members had listened they would know it was corroborated by the Minister.

10.15 p.m.

Mr. Bevan: The hon. Gentleman heard the Minister say that the cost would be negligible, so that some public money is involved. We do not know how much


this will cost. The Minister himself would find it difficult to say. He, at the moment, does not know the number of vehicles to which this concession applies. What I am trying to point out is that a large number of vehicles will be sneaked out of one class into another, and the higher classifications will be lost to the general taxation of the country. We are, in fact relieving a certain class of taxpayers, at the expense of the national revenue, and we are doing so after consultation with the recipients of the relief, before it has been considered in the House of Commons. I think the time has come for a protest against this method of conducting public finance. If hon. Members wish to state a case for their constituents they should state that case in the House of Commons and not sneak round the corridors of Government Departments, to get a concession before the House of Commons has discussed the matter at all.

Mr. Benson: I think the hon. Member for Ebbw Vale (Mr. Bevan) is extremely unreasonable. Farmers do not pay Income Tax. They do not pay rates. Why should they pay motor tax?

Captain Heilgers: I would like to relieve the anxiety of the hon. Member for Ebbw Vale (Mr. Bevan) by assuring him that not all farmers will be placed in the position which he has described. In my own case, as far as I can make out, the result of the new Clause will be that in future I shall pay 10s. for my two tractors. Previously I had to pay nothing at all.

Clause read a Second time, and added to the Bill.

NEW CLAUSE.—(Charge of armament profits duty.)

(1)Where the profits arising in any chargeable accounting period falling within the three years beginning with the first day of April, nineteen hundred and thirty-nine, from any armament business (as hereinafter defied) exceed the standard profits, there shall be charged on so much of the excess as arises from armament contracts a tax (to be known as the armament profits duty) equal to three-fifths of that part of the excess.

(2)The proportion of any such excess as is mentioned in Sub-section (1) of the Section which is to be attributed to armament con tracts shall be ascertained by reference to the

proportion which the turnover under armament contracts bears to the total turnover of the business in the chargeable accounting period in question:

Provided that—

(a) if the person carrying on the business satisfies the Commissioners that in fact a proportion of the excess less than that ascertained as aforesaid arises from armament contracts, such adjustment shall be made as appears to the Commissioners to be just; and
(b) if on the application of the Commissioners the Board of Referees, after giving the person carrying on the business an opportunity of being heard are satisfied that in fact a proportion of the excess greater than that ascertained as aforesaid arises from armament contracts, such adjustment shall be made as appears to the Board of Referees to be just.

(3)If the person carrying on a business is dissatisfied with any decision of the Com missioners under proviso (a) to the last preceding Sub-section, he may appeal to the Board of Referees and the board may make such order in the matter as they think just.

(4)If any dispute arises between the Com missioners and the person carrying on any business whether or not a contract is an armament contract the matter may, on the application of either party, be referred to the Minister and the Minister, after giving each party an opportunity to be heard, shall decide the matter and his decision shall be final.—[Sir J. Simon.]

Brought up, and read the First time.

10.18 p.m.

The Chancellor of the Exchequer (Sir John Simon): I beg to move, "That the Clause be read a Second time."
I think the Committee has already followed the scheme of this duty, though no doubt a number of fresh points of detail may arise on the later new Clauses.

Mr. Garro Jones: On a point of Order. May I ask you, Colonel Clifton Brown, and also the Chancellor of the Exchequer whether, as the new Clauses dealing with this subject appear to be interwoven at many points, it would not be desirable to have a wide Debate which would cover all the new Clauses?

The Deputy-Chairman: I could not approve of that course. We have already had a wide Debate on the Ways and Means Resolution. I think at this stage we must keep to each new Clause as it is presented to the Committee.

Mr. Garro Jones: While in no way objecting to your Ruling, Colonel Clifton Brown, may I respectfully submit that


the fact that a full Debate has taken place on a Financial Resolution has never been regarded as a reason why a comprehensive Debate should not take place on the Clause, when the Financial Resolution has been embodied in one Clause. In this case the Financial Resolution is embodied in several Clauses, and while I do not wish to press the matter in face of contrary opinion, it seems to me that it would be better to have one discussion on the wider issue, including this and the subsequent new Clauses.

Sir J. Simon: In so far as this is a matter of order, you, Colonel Clifton Brown, have given your Ruling, and we shall accept it. I should have thought myself that we were bound to treat the new Clauses, which now appear on the Paper—as indeed we shall—in the same way as Clauses in the Bill, that is one by one. At any rate, I have prepared myself so to deal with it, and I hope there will not be any unnecessary complications. I agree with the hon. Gentleman in this sense, that it might be convenient that we should be reminded that when we come to the later Clauses there will be some definitions of matters included in this Clause, and no doubt hon. Members may wish to remind themselves of that now. This new Clause begins:
Where the profits arising in any chargeable accounting period falling within the three years".—
the definition of that is to be found in the later Clause on page 1739. It goes on:
beginning with the first day of April, 1939, from any armament business (as hereinafter defined")—
that is the Clause on page 1734—
exceed the standard profits, there shall be charged on so much of the excess as arises from armament contracts a tax … equal to three-fifths of that part of the excess.
I would like to point out to the Committee that while the duty thus proposed is three-fifths, or 60 per cent., that is the charge made on the excess in respect of armament profits alone, and consequently, if we take for greater simplicity the figure of 100 as measuring the total excess of armament profits, this contribution will take 60 of the 100. There is superimposed on that the National Defence Contribution of 5 per cent., or 1s. in the £ and, therefore, taking my figure

as before, that will reduce what was originally 100, and has now become 40, to 38. There is then imposed on what is left Income Tax at 5s. 6d. in the £,and that will reduce the £38 by £10 9s. The result is that there is left, after paying these three taxes out of the £100, £27 us. I do not think it will be denied, therefore, that the application of 60 per cent. is an adequate charge. No one will suggest that there must not be left a proportion of the excess, or the result would be to discourage rapid production and increased profits. I mention that because I think there must have been some misunderstanding as to the severity of the proposed duty.
The next subject dealt with in the Clause is in Sub-section (2), which was the subject of some observations by the right hon. Gentleman opposite when we discussed the Resolution. The proposal is that we should take the excess, which in many cases will be the result of a combination of non-armament and armament work, and proceed, by the provisions of Sub-section (2), to find out what part of it under this Clause should be attributed to the armament side of the business. I have studied carefully what the right hon. Gentleman said the other day. He has great mathematical power. He explained his proposal to the Committee, and I think I understand the difference, but I think his suggestion is open to two very considerable objections. Unquestionably it is a more complicated plan, for the right hon. Gentleman suggested a method of distribution which would involve essentially, in the first place, taking the profits of the standard year, whatever it may be, and seeing how the profits of that year were made up as between armament and non-armament work.
The method which we propose here avoids that, which is a difficult computation, and it produces a formula which I think is certainly simpler. I doubt, with great respect to the right hon. Gentleman, whether his alternative even has the right to claim that it is more scientific. It proceeds upon the assumption that the profits on the non-armament side of the business are not to be regarded as having increased, and, consequently, that anything which shows as an increase must be attributable alone to the armaments business. At any rate the illustration which he gave the other day seemed to have


that result. We think it would be better to have the plan which is proposed here, by which, having found what is the excess as compared with the standard year—that is, for the business as a whole—the attribution of that excess as between the non-armament part of the business and the armament part should prima facie be proportionate to the turnover, but that if there be adequate reason for challenging that distribution there should be a provision made, as is made in Sub-section (3) of the Clause, for it to be corrected by the Board of Referees. Nobody can doubt that the Board of Referees are the body to do it.
The right hon. Gentleman appeared to think the other day that it would result in endless appeals to the Board of Referees. I do not think that the Inland Revenue on the one hand and great business firms on the other are so completely quarrelsome over the methods of examining accounts that that would happen. I think it will be found in many cases, as we find in connection with Income Tax, that the Inland Revenue authorities and the taxpayer will arrive at an adjustment which is right and proper by an examination of the same figures with the same care as is employed in connection with other branches of direct taxation
Those are the main provisions here. The turnover which is referred to in Sub-section (2) for the purpose of distributing the excess of profit between armament and non-armament business is not the same thing as the receipts. "Receipts" mean the amounts that are paid and received in respect of the work of the year, but turnover, as it is defined in a later Clause, is the net amount charged in the chargeable accounting period in question. If everybody paid everything that he should pay on the day it is charged the two things might be the same, but I think it is the experience of people in various walks of life that there is a certain lag, and that the net amount that is charged is more, probably, than the amount which is received. I have known professions in which that sometimes occurs, and I dare say it is so in business as well. That is the nature of the Armaments Profits Duty which is here proposed. The application of it to particular contracts is the subject matter of the following Clause, a very important one with the side heading, "Meaning of 'armament business' and

'armament contract'" and therefore, I do not discuss it now. In the same way, the detailed provisions as to the computation of the standard profits occur in a third Clause which we shall come to in due course. I hope I have dealt adequately with what the Clause before us actually contains, and, of course, we shall discuss in due order the provisions of the Clauses which carry this proposal into effect.

Mr. Gallacher: If a firm has the same amount of armament work as of civil work and makes the 6 per cent. the standard profit, made up of 9 per cent. profit on the armament work and 3 per cent. profit on the civil work—that would be a general level of 6 per cent. Profit—would that firm have to pay on the excess profits made out of the armaments or would it be cleared because of the general level?

Sir J. Simon: I think the hon. Gentleman's illustration puts the point very simply. I do not know whether he has a copy of the Clause in front of him, but if so I would ask him to refer to the proviso. Prima facie the distribution might be a level 6 per cent. overall as he suggested, but
if, on the application of the Commissioners the Board of Referees, after giving the person carrying on the business an opportunity of being heard are satisfied that in fact a proportion of the excess greater than that ascertained as aforesaid arises from armament contracts"—
therefore it is not really 6 per cent., but is 9 per cent.—
such adjustment shall be made as appears to the Board of Referees to be just.
The scheme is really that, in the first instance, the distribution shall be level as between the two kinds of business, but that, as the proviso reads, if, on examination of the figures, it is shown that the greater part of the profit comes from the armament figures, it must be liable

Mr. Gallacher: The proviso, which I have carefully read, refers to an excess over the standard profits with which the Commissioners are dealing and it says:
if the person carrying on the business satisfies the Commissioners that in fact a proportion of the excess less than that ascertained as aforesaid arises from armament contracts, such adjustment shall be made as appears to the Commissioners to be just.


In the Clause and in the proviso we are discussing the excess over the standard profits, but if there is a standard profit in the business, will the Commissioners trouble with it at all to find out whether the standard profit represents an excess of profit's in armament work as against the very low profit on civil work?

Sir J. Simon: I think my explanation is right, but I will do my best to make the point clear. For this purpose we assume that we have, from the particular firm, a figure which is the standard profit. The object of the Clause is to get a contribution, not from anything up to the standard profit but from an excess above the standard profit. It is necessary to ascertain how far the excess profit is to be regarded as coming from non-armament work and how far from armament work. I agree with the hon. Member that the scheme is that, unless there is something to be shown to the contrary, it will be treated as arising in proportion to the turnover, but that is subject to the proviso—a very important proviso—that if the Commissioners of Inland Revenue, after hearing what the firm has to say, and of course examining the books say, "No, the pro portion of the excess"—

Mr. Gallacher: The excess; but there is no excess; there is just the standard profit.

Sir J. Simon: Well, there is no charge at all.

10.35 p.m.

Mr. Pethick-Lawrence: We are now about to discuss the main principle underlying this new taxation. We dealt with the matter fairly fully last Monday, but we are now discussing the Clauses in detail. In the case of the first Clause, Subsection (1) is the general operative part, and Sub-section (2) defines exactly how the taxation is going to be imposed. We are accustomed at Question Time to hear a stentorian voice which frequently reminds Ministers in the form of a question: "Is not the whole matter thoroughly unsatisfactory?" I venture to suggest that the condition of Sub-section (2), as it has been explained and re-explained by the Chancellor of the Exchequer last Monday and to-day, is still thoroughly unsatisfactory. I will explain my point, and I think that in so doing I shall probably be able to answer the hon. Member for West Fife (Mr. Gallacher).
This tax is not concerned with the excess of the rate of profit over some rate which ought to be the standard rate; it is concerned with the excess of the total profit made by the firm on armaments in one particular year over the total profit made by the same firm in another year, namely, the standard year, and I understand that that is the object of the tax. I take it that those who drafted these provisions, when they went into the matter, found that the profits made in one year might differ from the profits made in another year, partly, perhaps, owing to an increase in the profit on armaments, and partly owing to an increase of other work. But when they came to apply the test, they did not in the least concern themselves with that fact, but took an entirely extraneous criterion, namely, what part of the profit in the year under review arose from armaments, and what part arose from other matters—an entirely separate thing.
Let me give one or two illustrations. In the standard year, the amount of non-armament work may have been considerably in excess of the amount of armament work, and the profit arising from the first may have been, therefore, in excess of that which arose from the second. But when you come to the year under review—the chargeable year—the proportion is not at all likely to be the same. It is just conceivable that the amount of work done by the firm on general contracts may have gone up very much, while the amount of work done on armaments may have remained stationary or may not have gone up equally. That is not very likely, but it is conceivable. On the other hand, the amount of work on the two sides may have gone up proportionately, though that again is not very likely at the present day.
The third alternative is that the amount of work done on armaments will have increased considerably, and the amount of work of a general character, if it has increased at all, will have increased by very much less. If, as we are told in Sub-section (1), the object is that the whole 60 per cent. is to be charged on so much of the excess as arises from armament contracts, the question which has to be decided is how much the profit on armaments in the year under review exceeds the profit from armaments in the standard year. But the criterion which


the Clause suggests is a totally different one, bearing no relation whatever to the facts. The Chancellor has treated this objection as a trivial one, but the same objection has been forcibly expressed by the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) and the hon. and gallant Member for Erdington (Wing-Commander Wright). They both pointed out this utterly absurd position in which we now find ourselves: that the criterion proposed has no relation whatever to the actual facts we are seeking to discover. That being so, this Sub-section is framed on an entirely wrong basis. As the hon. and gallant Member for Erdington pointed out, it might easily work out that the 60 per cent. tax would fall on only half the amount shown, and that, therefore, it would really be a 30 per cent. tax.

Sir J. Simon: I have some difficulty in following this. I wonder if the right hon. Gentleman would tell me what would be his way of dealing with the case of a company which in the standard year was not doing any armament work at all. It seems to me that in that case he would call the whole profits made out of armaments by the company in the year under review, excess profits.

Mr. Pethick-Lawrence: Where the right hon. Gentleman is entirely incorrect is in assuming that I have suggested any specific method of arriving at a result. What I have said is that the method the Government propose is so confused that the right hon. Gentleman in his various explanations has not finished explaining his confusion. All I have said is that the prime criterion adopted is, what proportion of the whole work is armament work in the year under review? That does not convey in the slightest how much of the excess of the year under review over the standard year has resulted from armaments profits.
Then, the right hon. Gentleman suggests that either party shall be entitled to call the facts into question, in order to right the wrong of the criterion which he has in the first place suggested. It would be perfectly clear that, in the vast majority of cases, the "simple" criterion—as the right hon. Gentleman calls it—will not give the correct result, and, therefore, one or other of the parties will certainly want to appeal. The

right hon. Gentleman says that it is only a trivial matter, and that he has too good an opinion of the Board of Inland Revenue and of the firms in question to believe that they will quarrel over some little difference in figures, but, in point of fact, it is practically the whole measure. It is a very large part of the tax. Supposing they are able to show that, in fact, their non-armament work has increased far more than their armament work, then clearly the criterion that is going to be accepted will serve their purpose. They will be able not to say that the real facts are that all their excess profit, or practically the whole of it, is due to non-armament work. Take a much more common case. If the Board of Inland Revenue are able to prove that nearly the whole of the increased profit of one year was on armament work, the Board of Inland Revenue will act entirely wrongly if they allow the proportions that the Government suggest here to remain. Therefore, they will bring a case and try to get the Board of Referees to take the opposite view.
What I said last Monday I will repeat. In fact, in nearly every case, if the firms are to do justice to them selves and the revenue authorities are to do justice to the country, they will have to dispute this wholly vicious figure which the Government are suggesting is the right figure in the first instance. Naturally I am not out to say exactly how the thing should be done. I cannot recast the whole of the Government's method of taking the tax, but I say that their criterion is an erroneous one, and that the method of putting that criterion right is going to involve, in nearly every case, a revision of the proportion. In these circumstances, so far from this proposal being a simple and reasonable one, it is a highly complicated one which will arouse considerable controversy, and naturally so. If a firm can prove that excess profits are mainly due to non-armament work, it can reduce the 60 per cent. of the excess quite properly to 5, 10 or 20 per cent. If, on the other hand, the revenue authorities prove that it is wholly due to the tax quite apart from the amount of non-armament work being done in the year under review, then they ought to get the whole 60 per cent. Therefore, it is extremely complicated.
If that complicated process is not gone through, in a very large number of cases,


a farm, instead of paying 60 per cent. will be paying 30 or 40 per cent. As the hon. and gallant Gentleman quite properly pointed out and as the hon. Baronet the Member for Kidderminster (Sir J. Wardlaw-Milne) also pointed out, it is a very ill-thought out method of computing the results. I believe that it makes the yield of the tax derisory, because a very large part of what should be the tax will escape the mesh, unless in nearly every case the Commissioners make the application that is put down here. We have not had an explanation which really covers the point.

10.49 p.m.

Mr. Benson: May I put one particular case to show how appallingly complicated and difficult this Clause is going to be. Take the case of an engineering firm—a very large number of contracts will go directly to engineering firms—which has been engaged either in the manufacture of motor cars or in the manufacture of motor car parts. Under an armament contract this firm might well be engaged in the manufacture of lorries or aeroplane parts for the Government. Owing to the increased horse-power tax there will be a big diminution in the output of cars, and the work that has hitherto kept the firm going will be seriously reduced. Another point that arises is that in the production of motor cars on a profitable basis it is essential to keep the machines working fully and to be able to produce more than a given number of any one model. The profit on motor car manufacture is based on the marginal number turned out, which may well be reduced to nothing because of the horse-power tax. While this diminution in the number of cars takes place another factor comes in—that is, an increase in the amount of engineering orders which are armament orders. The result would be that whereas the motor car manufacturing part has contributed nothing to profits, the profits have been borne entirely by the extension in the manufacture of aeroplanes or other Government orders.
There will be extraordinary difficulty in analysing, when you have two comparatively similar types of product, which part of the output is bearing the profits. You will have to go with meticulous care into the whole costings of the firm. The Commissioners will have to prove their case and give the costings to show that the

armament work has produced a higher ratio of profit than the private work. But you are already supposed to have put your armament orders under a careful costing system which has been directed towards eliminating excess profit. If there is excess profit arising to be taxed under this Clause it is due to the failure of your costing system, and it is only your costing system which will enable you under this Clause to apply the tax. The profits have arisen because your costing system has failed, and you are going to use that system to remedy the original failure. It cannot be done. This tax must fall crudely and inequitably because you will have to depend on a costing system which ex hypothesi has failed.

10.54 P.m.

Wing-Commander Wright: When we discussed this matter on Monday I put four questions to the Chancellor of the Exchequer, which I do not think were frivolous, and I go: a reply to only one of them. As there is a good deal of doubt existing in the minds of manufacturers on the questions which I raised, I should like to ask them again. I will refer first to the question of receipts. I think the Chancellor of the Exchequer has answered my question, because it seems as if he does mean receipts of cash in a particular year. I should, however, like to ask him a further question on that point, because I think it is one which will cause a certain amount of unfairness and will lend itself, perhaps, to a suggestion of, I will not say twisting, but unfairness on both sides.
Under the normal method of business, obviously, if a firm receives £200,000 worth of business in one year it will have to have done a great deal more than £200,000 worth of turnover in the first year of its business in Government contracts, because the normal lag is at least three to four months. Therefore, a firm may easily have done over £200,000 worth of business in its first year and not have received anything like £200,000. If it is understood that that is the basis on which we are working, I am content, but I think my right hon. Friend will see that a firm might normally be doing a turnover of £180,000, and therefore would never in any particular year be liable for this duty, by delaying payment in the first year and hurrying payment in the second year the Treasury would be able to obtain a tax in the second year, while actually in


neither of those years would the firm have done £200,000 worth of business. That may arouse a good deal of controversy and trouble, and therefore I suggest to my right hon. Friend that he might review that matter further before coming to a final decision.
A further point that I raised, which has been referred to to-night by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) was the question of arriving at the tax on the excess profit. Those of us who understand business will not have any doubt in our minds that excess profit which arises where a firm has had an enormously increased turnover arising from armament orders adding to its civil business, has actually made that excess profit by reason of the fact that it has received those extra orders from the Government. We all know that in running a business there is a certain datum line of turnover which must be reached before any profit is made, but when you have passed that datum line of turnover then the proportionate profit on the increased turnover is proportionately large, and as in this case the increased turnover comes only from the added Government business, obviously the excess profit must arise from that source.
My third question, which is perhaps the most important of all, and I do not see anything which clears it up, relates to subsidiary companies. I asked whether subsidiary companies were going to be treated as if they were individual companies receiving individual contracts, or whether the parent company was to be treated as the company which was receiving the business. I gave as an instance of a company the I.C.I., who, obviously, would be receiving orders for many of their subsidiary businesses which probably would not amount to £200,000. Obviously, the I.C.I. would be doing business far in excess of that figure. I pointed out that this could be a double-edged sword, and I think it is only fair that companies and traders throughout the country, who are most anxious to receive information on this point, should have it made clear to them whether subsidiary companies are, in fact, to be treated as separate businesses, or whether they are to be treated as part of the parent company.

The Chairman: The hon. and gallant Member is getting away from the new Clause. I do not think that question arises.

11.0 p.m.

Mr. Gallacher: I am sorry that I did not make my question to the Chancellor of the Exchequer sufficiently clear, but I would like him to understand that I put the question because of the wide experience I have had in the engineering industry. The hon. and gallant Member who has just spoken referred to those who know something about business being able to offer advice. I may not know much about business, but I know a lot about business men, and I know that with even the most efficient costing methods you can still have a process which will defeat the desires of the Chancellor of the Exchequer. If it is a firm which is doing armament work, lathes, jigs and gauges will be necessary. They will go in as overhead expenses on the armaments account, but it does not follow that all the time they will be used in armament work. With a slight modification they can be used for carrying on civil work. There is not only the question of the overheads which can be legitimately charged to armament work £I have seen them so charged £but the position of such a firm as the Imperial Chemical Industries with its subsidiary companies. Take a firm which is doing Admiralty work and also doing civil work. The civil work which it is doing it may be done by a subsidiary company or by a firm in which it has considerable interest. We have had experience of that. The Financial Secretary to the Treasury was until recently Minister of Mines, and he can tell the Chancellor of the Exchequer that it was a common thing in the mining industry for coal owners to charge heavy prices to the consuming public and sell certain of their products at quite a nominal price to the subsidiary undertakings. That is a common thing.
You can have an industry where the normal profit for a standard year is 6 per cent.—I would not give them more than 2½ per cent.—and for all that trading profit to come out of the arms account and not out of the civil work. The Clause deals only with excess of standard profit for the year, and nothing else. If there is no excess there is no question of the Commissioners coming in and interfering


with the profits of that firm. Yet you can quite easily have a situation where 12 per cent. is being made on armament work, and the civil work is done at a loss, and big profits are made out of some other civil work of a subsidiary character for which that particular work is being done. That is a situation that will arise, although not to the exaggerated extent that I have mentioned in every industry. We had experience of it during the War. The shop stewards went round the different factories watching the operations there, and if the Government had been prepared to consult the shop stewards, they could have made most alarming exposures of what was happening; but the Government did not want to consult them, and, as a matter of fact, Ministers were anxious to proclaim to the world that they did not want to have anything to do with shop stewards. That was a very serious mistake.
During the War, we had experience of what can happen. For instance, they were getting an allowance for the men who were being employed, and they were employing engineers who had never seen an engineering job. There was a case in an ordnance works in Coventry where an engineer who had been taken on was given a chisel which needed sharpening, and he put it on the grindstone and gave it two or three rubs, and then stopped the grindstone and started to strop the chisel up and down the driving belt. That is typical of what was happening. They were stuffing the place with men in order to get money out of the Government. There could be a situation in which men were placed on Government work or armaments work and were spending most of their time on work of a civil character.
Therefore, I ask the Chancellor to recast this new Clause. I am certain that as the new Clause is now, he will get little or nothing out of the proposed tax. Proof of that can be seen in the fact that when the Resolution was being discussed, none of the hon. Members opposite was interested in the discussion. I am certain that there is not an hon. Member opposite who is prepared to make any sort of opposition to this tax. Never before have we had a new tax directed against industry without finding some representative of industry opposite who was prepared to say something against it. There is not an industrialist in the country who will not be capable of getting round this tax

and avoiding any serious payment under it. Therefore, I suggest to the Chancellor that, whatever may be made the standard, the Clause should be framed in such a way that the Commissioners will be able not only to ensure that, as far as costing is concerned, all the weight is not thrown on the side of armaments, but that, at the same time, where the general profit is only the standard profit, the Commissioners will be able to examine whether the standard profit is made up from excess armaments profit, and if so, to tax it accordingly.

11.9 p.m.

Mr. Ede: I was rather surprised by the answer which the right hon. Gentleman gave to the question put to him by the hon. Member for West Fife (Mr. Gallacher).

Sir J. Simon: I do not think I quite understood what was put to me.

Mr. Ede: I realise that the long-stop is now sitting beside the wicket keeper, who appears temporarily to have gone out of business. While he still retains the pads and gloves, the right hon. Gentleman, I suppose, is now like a small boy who acts as long-stop and has some old coat with which to stop balls coming his way. This one caught him rather unprepared, and he had to put out his raw hands in order to stop the ball. The hon. Member for West Fife gave the question in percentages. As I understand it, we are not engaged in percentages but in lump sums. Let us assume that' a firm made a profit in the standard year of £100,000 and that in that year it was doing no armament work at all. It still carries on a civilian business of the same size and, in addition, it gets certain contracts which for the purposes of this Act will be regarded as armament contracts. As I understand it, it may cut down its profit on its civilian work and charge a quite exorbitant sum for its armament profits, and, unless its profits on the two exceed £100,000, there will be no excess and, in consequence, no sum will be brought into review. That was the right hon. Gentleman's answer as I understood it. If I am told that that was a mistaken answer, or that I misunderstood it, I do not want to pursue the point.

Sir J. Simon: I think in substance the hon. Member is right, though there are one or two qualifications, for instance the


ruling out of an increase in capital. But I agree that it is a scheme by which you compare what is the standard profit of the firm with the profit in the year of charge, and it is when the profit that it makes in the year of charge is found to be greater than in the standard year that you arrive at an excess and certain calculations follow.

Mr. Ede: In the case I have given one must reasonably assume that there would have been some increase in the capital employed, but I am assuming that some formula is employed, so we get back to the comparatively simple case which is the essence of the problem that the two sides of the Committee would desire to have argued out. It seems to me, if that is a simple way of putting what will be a more complicated case, the Clause is seriously lacking, because I cannot think that anyone in the Committee really means that firms are to be in a position where, by getting Government work, they can make unusually high profits in order to depress the profits they get out of civilian work, and thus for civilian work to enter into unfair competition with firms which have not managed to get Government contracts. I do not know the extent to which such a temptation would cause people to fall. Some hon. Members opposite think that no amount of temptation would lead anyone into such a way of conducting his business, but clearly we spend a great deal of our time in trying to do things in this Bill which arouse the most terrible fears in the breast of the hon. and learned Gentleman the Member for Ashford (Mr. Spens) and others as to the extent to which our effort to prevent evasion of taxes is going to unreasonable lengths.
Here is a comparatively easy way of evading this new tax which ought to receive the attention of the Government before the Clause is finally incorporated in an Act of Parliament. If it is as easy to evade the clear intention of Parliament, as I have suggested, then Parliament ought to deal with the matter. I hold the view that in connection with this duty we shall ultimately get into difficulties such as beset us in connection with the Excess Profits Duty. I remember the case of a public house in Surrey which was painted continuously for a year by the brewery company. As soon

as they had finished at one end, they started again at the other in their efforts to absorb money which would, otherwise, have been paid in Excess Profits Duty. What we want to do is to prevent profit arising. If unreasonable profits are made out of armaments, even if we do get 60 per cent. back in taxation, the effect will be seriously to disturb the price level in ordinary civilian commodities. I think that cannot be disputed. Those of us who buy steel in the form of household requisites may find the prices put up against us, as the result of the higher profit of the armament manufacturers, while nothing goes into the Exchequer in respect of that increase. In a substantial number of cases, we fear, increased prices will be paid by civilians and the Exchequer will reap no benefit.
I ask the right hon. Gentleman to give his views on the case which I have put to him. Are we to understand that the Government regard that position as one which can very easily arise in the working of the Clause. The right hon. Gentleman will agree that while that may satisfy the long stop, while it may even satisfy the wicket-keeper—who is always glad to see the long-stop getting his hands injured rather than himself—he cannot expect it to satisfy either the captain of the team or the spectators, and the barracking that ensues may lead the Chancellor of the Exchequer to take a far longer journey than that from Spen Valley to Yarmouth. If he regards this tax as a serious proposal, we must ask him to deal with the point which has been raised.

11.18 p.m.

Mr. Garro Jones: I venture to offer my congratulations to the Parliamentary Secretary to the Treasury on having contrived, as usual, to bring about a Debate on a subject of this character at this hour of the night. Everybody knows that, at this time, nothing except a speech in favour of the reform of the law of libel, or a speech on the reform of the Official Secrets Act, or the unusual event of something arising in the Debate which redounds to the credit of the Government, is likely to have any notice in the Press on the following day. I desire to deal with the question of evasion, and I recognise the difficulty of doing so on this Clause, without referring also to the other Clauses which are interlocked with it.


Two questions are involved. One is the question of assessability to the tax in respect of the amount received and the figure of £200,000. The other is the degree of assessability, in respect of the amount to be paid, and it is impossible to separate these two matters in discussing evasion. I want to ask the Chancellor of the Exchequer to reinforce what was said by the hon. Members for West Fife (Mr. Gallacher), South Shields (Mr. Ede), and Erdington (Wing-Commander Wright) on the question of evasion.
I propose to put forward two or three further possibilities of evasion of this tax, in regard to which I should like to be assured that the Chancellor is at least forewarned, and the first matter that I should like to raise is the question of evasion by adjusting, as between different years, the amount received. The initiative there does not rest solely with the Treasury. The hon. and gallant Member for Erdington was very much afraid that the Government Department, by withholding payment to any particular firm, could ensure in any given year that that firm would be above the £200,000, realising that it would be impossible for it to go above that amount in another year. The hon. and gallant Member wanted to secure that the company should be fairly treated by the Treasury, but I want to secure that the Treasury shall be fairly treated by the company, and my point is that the initiative in making these adjustments does not rest solely in the hands of the Treasury, but may rest in the hands of the company, in this way: Everybody knows that when an amount is in dispute, payment is held up, and I can conceive of circumstances in which companies on the borderline of assessability will do all they can to postpone payments in order to ensure that in a particular year they will not come within the limit of £200,000. That is only one aspect of the matter, and I mention it only in view of the remarks made by the hon. and gallant Member for Erdington.
The second aspect of evasion to which I should like to draw attention is the question of subsidiary companies. [Interruption.] I trust the Chancellor will not raise the question of relevance, because I think he did not hear my opening remarks, in which I attempted to connect this question with the Clause now before the Committee, and I think I have

successfully shown that it is impossible to discuss it except in connection with this Clause, because here we are dealing with profits arising under a later Clause, dealing with assessability, but it requires both those matters to bring evasion into relief. Therefore, I trust that I shall be permitted to discuss it now. If the Chancellor of the Exchequer is not going to take drastic measures to prevent evasion by way of judging as between companies, he will further deplete the already sparse amount that he expects to receive from this proposal, and there again it will not only be depletion in respect of avoiding assessability, that is to say, avoiding coming within the £200,000. There are all sorts of ways of distributing profits as between companies in order to ensure that some of them will escape and others gain. I will give one example, that of a company with three subsidiary companies. One of these companies is a retail company, another a manufacturing company, and the third a company which holds the shares and manipulates them on the Stock Exchange. Everybody knows that it is possible, by one company purchasing its supplies from one of its subsidiary companies in one year at an extremely low price, to show in the next year very favourable profits, and when the shares have been duly inflated by that procedure for two or three years, it induces its subsidiary company to sell its goods at an increased price. The shares then fall, and those shareholders who were forewarned will again reap the benefit. I want the Chancellor of the Exchequer to make sure that, both as regards assessability and the juggling of profits as between subsidiary companies, these matters have his supervision.
The final aspect of evasion to which I desire to draw attention, though I have not exhausted or even begun the catalogue of possibilities in this direction, is the division of orders as between companies. With the Clauses in their present form nothing could be easier than to divide orders. If a company has a large factory it is a very easy accounting matter to divide that factory into two or three subsidiary companies, and, so far as the Chancellor has told us, if they succeed by that method in bringing the total amount received by all those companies in any one accounting year below £200,000 in the aggregate, they will not be assessable. I


trust that that is not an accurate assumption, but it has been made several times, and the Chancellor has not yet thought it necessary to deny it.
As to the method of collection, I understand that it will depend upon the supervision of the Ministry of Supply, that it will be for that Ministry to attempt to follow down the orders through the main contracting company; by means of reports from the main contracting company as to their sub-contracts they will follow the contracts right down to the sources of supply of certain raw materials, except those raw materials which the Minister is empowered to exempt from taxation under a later Clause of the Bill. Further, I should like to know whether it is proposed that returns shall be made, and that those returns will be demanded only from those firms which the Minister of Supply has information to show have received armament contracts; or will general forms be sent out to all companies within the range of the net requesting them to make returns of all their armament orders? Have the Government considered the possibility of securing that every order issued by Government Departments should be marked "A.P.D." and every sub-contract sent out in connection with that order marked "A.P.D.," and that every order which is received with that mark upon it shall be included in the returns sent in by the company, whether it is asked for a return or not? I should like to make that suggestion to the right hon. Gentleman.
I will conclude by saying that I have just been reading an article in a publication called the "Stock Exchange Gazette." I am not able to say whether it is one of the respectable or other class of publications dealing with Stock Exchange business. It says:
The new duty is the Government's concession to Labour. Despite the heavy scale of taxation, wealth must be conscripted as well as man-power.
I hope that is not the beginning of an attempt to saddle any responsibility for this tax upon us. The second point I read is:
Its rules are so complicated that no company secretary can tell his board what they have to pay.
The next point is:
We imagine that few, if' any, firms are engaged solely on armament work, and that no

company will be able to assess its liability quickly or with certainty.
The last point is:
Whether the Treasury will make a large haul remains to be seen, and optimism is restrained on that score.
I believe they have chosen the wrong word. I believe the Government would be very alarmed if they thought they were going to get a large haul from armament manufacturers. The right hon. Gentleman has made no computation of the receipts from this source. For several months most of the speeches from the other side have been in defence of profits made by armament manufacturers, and the claim has been made that, unless they are allowed to make these profits, we shall not get the goods. Therefore, I should say that, not optimism, but pessimism, is restrained at the Treasury, and that they are not really anxious to receive large amounts from this source. The next article in the publication from which I have quoted is headed "Promising Securities." I venture to say that the same fate which usually awaits what are classified as promising securities in these publications will probably await this proposal.

11.31 p.m.

Sir J. Simon: I think the Committee will wish me to deal shortly with some of the points that have been raised, and I will take first the one which has just been made by the hon. Member for North Aberdeen (Mr. Garro Jones). It is true that I cannot offer any estimate of the yield of the duty, but all contributions will be welcome, and if the duty, applied, as it will be, according to the law, should produce substantial sums, I as Chancellor of the Exchequer, shall be the last person to regret it. The public generally would certainly desire that a proper contribution should be obtained, and if, as is alleged, there should be a number of cases in which the ball gets past the wicket-keeper, or a series of wicket-keepers, there will still be a number in which it will be prevented from reaching the boundary by the activity, skill and energy of the long-stop.
The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) put extremely clearly the point on which he asked for an answer. This proposed duty, as he says, is not a duty that deals with percentages, but with


total sums. The scheme is that it shall deal, not with profits, but with excess profits, and not with profits however made, but with profits which are so made that they can be called excess armament profits. I agree that if we were taxing all sorts of profits above a particular standard, and were not trying to divide as between armament and non-armament work, that would in some respects be simpler. If you make a thing universal, it is naturally simple. The right hon. Gentleman supposed the case of a company which in the standard year made £50,000 from armaments and £50,000 from other goods, and in the year of charge made £75,000 from armaments and £25,000 from other work, so that the total amount of profit was the same in both years. That is excluding, as the right hon. Gentleman and I agree, all questions of additional capital. He says that in such circumstances the tax would not bring in anything, and that is quite true.
Take the case of a business which some years ago was devoting itself successfully to the production of ordinary articles of commerce. On the invitation of, or under pressure from, the Government, such a firm may have set aside that work and have undertaken an extensive business of producing armaments. It may also be that the company has sacrificed its non-armament business and has pushed on with the other part of it. Would it be just in such circumstances for me to say: "That is your story, but none the less I am going to disregard altogether the fact that you have lost the profit on your non-armament business which you have so starved. I am simply going to attend to the fact that you have made a profit on the later development. Therefore, I am going to charge you with the special tax." That would not seem fair at all. The instance which I gave to the right hon. Gentleman the Member for East Edinburgh was very much in point. I consider the case, a very common one, of a firm which earlier on was not making armaments at all, but was doing only the ordinary commercial business, which it has now substantially abandoned in order to undertake armament work. How is it proposed that you should deal with the profits of that firm. It is now an armaments firm, doing nothing but armaments. I think I was right when I put that case to the right

hon. Gentleman and asked him how he proposed to deal with it. The right hon. Gentleman replied, as he was entitled to, that he was not proposing any solution. He was in the position of the critic, pointing to what he thought were the defects in the Government's plan. If we say that the profits which are made by a firm which is now doing nothing but armaments are to be exposed to the tax, how are we to determine what the tax is to be? Are we to tax the lot? The only possible way of trying to determine the armament and the non-armament profit is to have a standard, and to ask: What were the profits of the firm in the year of charge? Having ascertained whether there is excess, you ask yourself the question: Where does the excess come from? I agree that it would be wrong to assume that it is spread equally over the whole, without the possibility of correcting it, for it may well be that in many cases it is due more to the armament work than to the non-armament work.
By all means correct that, but do not adopt a method which would cause great injustice to people who have deliberately accepted losses or deductions or even failures in the non-armament part of their established businesses because they are engaged in the intensive application of their powers for the purpose of producing armaments. I do not think we shall be doing a good thing to the country or a fair thing by them if we do not recognise that when their total profits go above a standard which has been reasonably fixed then, and then only, arises the question of getting this special contribution from them.

11.39 p.m.

Mr. Pethick-Lawrence: As the right hon. Gentleman has quoted me, perhaps I should answer his point, which is entirely distinct from that which I made. The right hon. Gentleman poses his question on the assumption that the firm was making all non-armament work and subsequently transferred to armament work. I have never suggested or even thought that you ought not to deduct the profit made in the first year from the profit made in the second year in order to get the excess. What I have said is that, having got that excess, as the right hon. Gentleman suggested, then only to take a part of it on which to impose the duty was a wrong way.

Mr. Ede: I put to the right hon. Gentleman this specific point. Where a firm is still doing the same amount of civilian work as before, it sees in this method of taxation an opportunity to reduce the amount of profit made on its civilian work by being very careful not to allow the amount to go above that for the standard year. If the profits from the civilian business in the first year are £100,000, and the total profits in the second year are £100,000, appropriately weighted, no charge will be made. It might be possible even for the firm to be losing, say, £20,000 on its civilian contracts, by deliberately undercutting its ordinary competitors, and then, by making £120,000 on its armament work, it may still evade taxation. That is a means of evasion that ought to be stopped.

Sir J. Simon: We often hear of clever schemes for making profits. The hon. Member suggests now the possibility of a plan to avoid making profits, in order to avoid paying taxes.

Mr. Ede: It may be that the losses are made by subsidiary firms.

Mr. Gallacher: Will the Chancellor ask the Minister for Mines whether that kind of thing is not actually being done by the mine owners?

Mr. Wragg: Will the hon. Member give an instance? That accusation is absolutely unwarranted.

Sir J. Simon: It is certainly the case that this is a scheme by which, on comparing the profits for two different years, you get the excess, and I am still of the opinion that that is the just way, especially having regard to the fact that many of the firms affected will be firms which have changed from non-armament into armament production. I recognise that the point put by the right hon. Gentleman was important, but his point really was as to whether we had adopted the best method.
The hon. Member for Chesterfield (Mr. Benson) said there ought not to be any of these excess profits if the costing assessment had been properly applied; yet you could not analyse these excess profits except by using your costing system. That is the nature of the argument. I do not agree that because we may have cases to deal with under this duty, as no doubt we shall have, it proves that the

costing system in the ordinary sense has failed. The costing system is the system, most carefully developed, by which you ascertain what the production of a considerable quantity of manufactures requires in the way of outlay, and you make some provision for profit on them. The thing which causes this rise in dividends on ordinary shares and these indications of exceptional prosperity in some armament companies is not that the costing system has not been suitably and skilfully applied; it is due to the fact that the quantities that have been produced are so vast that the amount that has been received has increased at a vastly greater rate than any increase of capital or plant. When that happens, it is possible to pay a greatly increased return on the ordinary shares, but that does not really prove that the costing system as such has not been properly applied. It is due to an immensely increased output which may, and does, require supplementary adjustments to be made.

Mr. Benson: May I remind the right hon. Gentleman that our costing system has been devised, and is supposed, to take into account that very point. As the increased orders are given, so the price is reduced. As has been explained to us on the Estimates Committee, most elaborate precautions are taken, and if these precautions operate effectively, they ought to be successful.

Sir J. Simon: The hon. Gentleman is speaking, no doubt, with a good deal of special knowledge, because I believe that he serves on the Estimates Committee. All the same, and this is a feeling that is widespread—if you come to some very large production, some supplementary check is needed such as has caused us to produce the Clause. I think it will be found that there will be cases which will show that, in spite of the best efforts of everybody in this immensely increased production, it is right to take the steps that we are now taking.
I was asked a question by an hon. Gentleman below the Gangway about subsidiary companies. I do not know whether it will be in order or not, but may I state in a sentence that the present provisions of this scheme are provisions which will deal with each company as it stands. There is not in this scheme a


provision which would group together a great many companies for the purpose of applying the main provision. The reason is that, from the revenue point of view, the point is only of importance if we have to check manipulations. It is very easy to talk about manipulations as if they were matters which could easily be devised without powers of control, but we are dealing here mainly with firms with very large businesses with which the Ministry of Supply or the other Departments place their contracts. The very fact that the Government place the contracts will act as a very effective check against such devices, and the powers that the Minister of Supply is getting under his Bill are to be such as further to insist that the contract is placed with the main contractor and is not manipulated as is suggested by some hon. Gentlemen here. Moreover, although we carry this now, the matter cannot come into full operation until the accounting period is over. If there were any ground for thinking that these methods of seeking to avoid the tax were really being adopted to a dangerous degree we should certainly take steps to correct that, as we could very well do, in the Finance Bill of next year. But I do not think that to the Inland Revenue Department this is going to be as serious a point as the hon. Member who raised it seems to think.

Mr. Garro Jones: The right hon. Gentleman has made a very important announcement to the effect that units of parent companies will be separately considered for the purpose of assessment. That is a further diminution in the yield of this tax. Suppose a great many companies take advantage of the repeated hints they have received from the Chancellor of the Exchequer that any lawful method of evading tax is all right and should form themselves into subsidiary companies for purposes which may have some collateral object but which will also result in avoidance of tax, I must say that I do not share the optimism of the Chancellor of the Exchequer that the mere power of the Minister to withhold contracts would be effective. We have found repeatedly in the Estimates Committee that the investigations of the Service Departments do not extend into the relationships between parent and subsidiary companies.

Sir J. Simon: I am afraid that I must attach some importance to the views taken by the very experienced people who are dealing with this most important matter. Nevertheless, I am obliged to the hon. Member for warning me as to the difficulties.
As to the last point which was mentioned by the hon. Member for Erdington (Wing-Commander Wright), it certainly is the case that the test which must be applied for the purpose of listing the companies liable is the test of receipts, and for the reason that that is the figure which the Minister of Supply knows. He could not know, except without a very elaborate inquiry, what is the turn-over. I have tried to answer these matters to the Committee, and I hope that I have given some information at least. If the Committee will let me have this Clause we may then deal with the next one.

11.53 p.m.

Mr. Kirkwood: I want to tell the Chancellor of the Exchequer on behalf of the young engineers who are in the armament factories that his statement to-night will cause a good deal of discontent among them. His statement is that the manufacturers, the employers; and the shareholders in those manufacturing firms are going to carry on just as usual. They are to get their standard returns. How does that affect the young engineer who has just finished his time, whose mother has starved in order to make her boy a tradesman? The ambition of the engineer's wife is that her boy shall be a tradesman. He has just arrived at the stage of a young journeyman. His time is just out and for the first time in his life he is going to enjoy a decent wage of from £3 10s. to £4 a week. Then along comes this Government and takes away that boy from her, deprives him of that income of £4 a week, and the only income he is to get is 10s. a week.
The sacrifice is all from one side. The armament firms are to carry on and get what they were always getting—a good return. There is to be no sacrifice from the side of the big employers of labour, but all the sacrifice is on the youth of the country. If this Committee thinks that the young engineers are going to lie down under that sort of thing it never made a bigger mistake in its life. The funny thing is that it never seems to dawn on Members on the other side, where all the brains are supposed to be, that we have


this spirit in Britain. I warn them that they can go on in this way only until human nature breaks. It only stretches a certain length. I warned the House when it introduced conscription that the engineers would revolt against it. As sure as fate the statement which has fallen from the lips of the Chancellor of the Exchequer to-night will cause nothing but discontent among the engineers in this country, and in no uncertain fashion.
I hoped that the Chancellor would tighten up this matter. I know something about the boys who are working. I will give the Committee an instance of my own employer, Beardmore. Beardmore told me that he was as poor as a church mouse, that he had made for the British Government £68,000,000 and that he had got nothing. He died a millionaire. Will this sort of thing always go on and will the working class tolerate the statements that are made from that Box time after time? If I do not raise a protest the very paving-stones will cry out against me. I warn the Chancellor of the Exchequer that something will have to be done. He cannot always go on mystifying the Members of this House. If he thinks that the working class inside the workshops are going to lie down without something happening he never made a bigger mistake.
Stoppages of work are taking place of a very serious character. The Government are not paying attention. They have not got their ear to the ground to ascertain what is going on in the workshops. Because everything is managed here and there are all kinds of arrangements, it is no indication. It is as if we were all working here for one another's good and were a harmonious party. You would think for the last fortnight that the House of Commons was a mutual admiration society. Instead of our fighting the Government, the purpose for which we were sent here, we are accommodating them. I want the Chancellor of the Exchequer to understand firmly that this sort of thing can go only a certain length, and that it has about reached the breaking-point in the statement which he made to-night.

Clause read a Second time, and added to the Bill.

NEW CLAUSE.—(Meaning of "armament business" and "armament contract.")

(1) If the Minister declares to the Commissioners that in any accounting period the total receipts of a business under armament contracts were not less than two hundred thousand pounds or, if the accounting period is less than twelve months, not less than such sum as bears to two hundred thousand pounds the like proportion that the length of the period bears to twelve months, the business shall, in relation to any chargeable accounting period which consists or forms part of that accounting period, be deemed to be an armament business.

Provided that, before making any such declaration with respect to a business, the Minister shall give to the person carrying on that business at least twenty-eight days' notice that he proposes to do so and shall consider any representations made by that person before the expiration of that period and if he makes the declaration, shall notify that person accordingly.

(2) For the purposes of the provisions of this Act relating to armament profits duty the expression "armament contract" means, in relation to any business —

(a) a contract between the person carrying on the business and His Majesty's Kingdom, being—
(i) a contract for the supply of anything required for the purposes of the armed forces of the Crown or of any foreign armed forces, or for the supply of any machines, tools, or materials required for making or repairing anything required for those purposes;
(ii) a contract for the execution of any works required for those purposes; or
(iii) a contract for the supply of any such equipment, appliances or other materials as are mentioned in Section nine of the Air-Raid Precautions Act, 1937;
(b)a contract under which the person carrying on the business supplies anything to, or executes any works for, any other person, being a contract entered into by that other person for the purpose of enabling him to perform an armament contract; or
(c)a contract between the person carrying on the business (being a company) and His Majesty's Government in the United Kingdom for the construction, alteration or management by the company as agent for that Government of any factory in the United Kingdom which belongs, or is to belong, to the Crown:

Provided that nothing in this Sub-section shall apply to any contract for the supply of any such articles or materials as may from time to time be specified in an Order of the Minister, being articles or materials which in his opinion are commonly required for purposes other than those mentioned in this Subsection and for that reason cannot equitably


be brought within the scope of the provisions thereof.—[Mr. Burgin.]

Brought up, and read the First time.

12 midnight.

The Minister without Portfolio (Mr. Burgin): I beg to move, "That the Clause be read a Second time."
The Committee will find this new Clause relatively simple. 'First of all, it is the Minister, defined in the definition Clause, who declares to the Commissioners, also defined in the definition Clause, that if in any accounting period, also defined, the total receipts of a business under armament contract were not less than the £200,000, or a proportionate figure for a proportionately less time, the business shall for that period be deemed to be an armament business. Before making a declaration the Minister gives the person carrying on the business 28 days' notice of his intention; he considers any representations made by the firm; makes the declaration and notifies the person that he has done so. For the purpose of this new Clause the Armament Profits Duty will only apply to armament contracts, and, accordingly, the new Clause states what an armament contract is. I call the attention of the Committee to the definition of armament work which goes to the root of the whole of this special tax proposal. It is a contract made between a business and His Majesty's Government. Under the new Clause it is only contracts placed by His Majesty's Government which involve an application of the duty, and these contracts are sub-divided into various kinds.
First, a contract for the supply of something for the armed forces of the Crown or of foreign armed forces, or for the supply of machine tools or materials required for the making or repairing of anything required for this purpose, that is, the armed Forces of the Crown or the armed forces of a foreign country. Second, a contract for the carrying out of any works, buildings, barracks or hutments—third, a contract for the supply of equipment and materials under Section 9 of the Air-Raid Precautions Act, 1937, and the Committee will remember that those refer to equipment, appliances and material as the Secretary of State may consider necessary for affording protection to persons and property from injury or damage in the event of an attack from the air. Those

are apt words, and they really in fact cover the materials referred to in the Civil Defence Bill. The next type of contract brings in the sub-contractors:
a contract under which the person carrying on the business supplies anything to, or executes any works for, any other person, being a contract entered into by that other person for the purpose of enabling him to perform an armament contract.
We have already, under earlier parts of the Clause, dealt with the main contractor. Sub-section (2, b) deals with a contract between some other person and the main contractor. Then there is a different class of contract altogether, which deals with such matters as the Government shadow factories—a contract between the person carrying on the business and His Majesty's Government for the construction, alteration or management by the company as agent for the Government of any factory in the United Kingdom which belongs, or is to belong, to the Crown. The Committee knows that a great number of factories have been put up as Crown property, in connection with which the Crown does not deplete Woolwich Arsenal in order to provide the management of the factory, but makes; a contract for an engineering or other concern to run the factory as agents for the Government. That type of agency contract is treated as an armament contract within this definition.

Mr. Kirkwood: How are you going to requite the individual who takes control of a factory of this description? It is a Government factory. How are you going to requite the individual who is going to run such a factory for the Government. Will he get a salary?

Mr. Burgin: I am much obliged to the hon. Member. There are, in fact, a large number of these contracts in existence, and it will be quite easy to give details broadly on one or other of them if the hon. Member, or any other hon. Member, so desires. As a rule, there is a remuneration provided for operating the factory on Government account. But what I am concerned with on this Clause is to point out that a contract of this character, however the remuneration is calculated, becomes an armament contract within the meaning of this Clause.

Mr. Kirkwood: This is a point of interest. On the Clyde they want to know


— the Minister is forcing me to give a name—how much salary or otherwise Sir James Lithgow, for instance, is going to get for running Dalmuir for the Government.

Mr. Burgin: I am not proposing to give figures. What I am saying is that the contract for the running of Dalmuir or any other Government factory is an armament contract within the meaning of this definition. The only other part of this Clause which I need explain to the Committee is the concluding proviso. The proviso says:
that nothing in this subsection shall apply to any contract for the supply of any such articles or materials as may from time to time be specified in an Order of the Minister, being articles or materials which in his opinion are commonly required for purposes other than those mentioned in this Subsection and for that reason cannot equitably be brought within the scope of the provisions thereof.
I will give the Committee one or two examples to show the meaning attached to this proviso. The sort of subject matter which will be treated as not equitably being included in armament contracts will be food, coal, perhaps paper, perhaps unwrought ores, and materials of that kind. [An HON. MEMBER: "Steel".] No, steel will come within the Clause. The proviso must be observed. It is not because they are common, but because of common use, and because it would be inequitable to include them as part of the armament contract. The Committee may like to know that when the Royal Assent is given to the Ministry of Supply Bill, it is the intention that it should be the Minister of Supply who becomes the Minister within the meaning of this Clause; and what will happen will be that when the Finance Bill and the Ministry of Supply Bill have received the Royal Assent, it will be the intention of the Prime Minister to issue an explanatory memorandum showing to all concerned exactly how it is proposed to administer this Clause. For the purpose of moving the Second Reading of the Clause and giving the Committee information I have perhaps explained sufficiently its ambit, and purpose.

12.10 a.m.

Mr. Pethick-Lawrence: We have before us this very extensive Clause. I do not know whether the Government really imagine that we can get the whole Com-

mittee stage by to-morrow evening. I do not think they realise what an immense burden they are throwing on the Committee. I do not think anything is to be gained by trying to drive the House of Commons at this rate. We have not had time to go into the details which are quite necessary if this tax is to be fairly considered. I should like to ask how far it is proposed to go to-night. I think we might give the right hon. Gentleman the Second Reading of the Clause if he would be content with that, and then we could discuss the Amendments at a more suitable hour. It is exceedingly difficult to start on them at this hour of the night.

Sir J. Simon: I think we ought to get the Clause. I put these Clauses down so that they were before Members as soon as the Resolution itself was put down. It is not the case that the Clause was put down at a day's notice or that it has been altered in any material way. We are obliged sometimes to sit a little late in Committee on the Finance Bill. I have no desire to see the House driven. I think it would be reasonable to get the Clause and then stop.

The Deputy-Chairman: If there is to be a discussion the right hon. Gentleman should move to report Progress so as to put himself in order.

Mr. Pethick-Lawrence: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
There has not been anything in the nature of obstruction. The main part of the Debate has been taken up by supporters of the right hon. Gentleman. I think they were very reasonable because they had a good many points to make, and they were comparatively short. I do not think we ought to be asked to go to the end of the Clause. There are several Amendments which are quite in order, and we ought to have adequate time to consider them.

12.15 a.m.

Mr. Bellenger: May I make this appeal to the Parliamentary Secretary to the Treasury who is responsible for the arrangement of business? We have had a very heavy day discussing very intricate matters, and most of the speeches have been from the Government side. Any speeches that have been made from this side have been brief and to the point. Very soon the hour will be so late that


many of us will feel that we might as well stay here, and if the Parliamentary Secretary to the Treasury does not prove reasonable, the Committee may be kept sitting for a very long time to-night. On that ground, I ask him to comply with the reasonable request of my right hon. Friend.

Mr. Gallacher: In view of the complicated character of this Clause which involves many questions apart from those raised in the Amendments, the Parliamentary Secretary to the Treasury ought to accept our proposal to report Progress. If he does not, then we should summon together the cohorts on this side and keep the Committee sitting until hon. Members opposite are completely exhausted. It is either report Progress, or no home to-night for anybody.

12.17a.m.

Mr. Alexander: I beg the Chancellor of the Exchequer to be considerate in this matter. We are not making any complaint about the way in which the proceedings on the Bill have been conducted, but this is a question of being asked to deal with very intricate and difficult questions at a very late hour of the night. The right hon. Gentleman said just now that we all knew the procedure on Finance Bills and how they often involved late sittings, but he will recognise that the Government have been driving the House of Commons very hard in other respects. We have had, in the last two or three weeks, other Bills of a major character. We have Committees to attend to-morrow morning. One of those Committees is dealing with a large and important Government Bill and already, after only one sitting the Government Whips are suggesting that that Committee should sit in the afternoons as well as in the mornings. Indeed the House of Commons is being pressed in a way that is almost unprecedented. That is not fair to the Opposition. If we are to bring clear minds to the consideration of questions of great mathematical and legal difficulty, this kind of work ought to be done at an hour when we are in a fit physical condition to deal with it effectively. I pay a tribute to my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) who has, with great persistence and tenacity, stuck to a long and difficult job on behalf of the Opposition, but I think it com-

pletely unreasonable and unfair that we should be asked to proceed any further to-night.

12.20 a.m.

Sir J. Simon: I feel that we must consider how we are to proceed with the consideration of this Bill, not only to-night but to-morrow. I do not want to put an unfair burden upon anybody, but we have to get the work done within a certain time. I do not know whether we might take it from the right lion. Gentleman opposite, that if we agreed now to what he has suggested, it would be understood that we would get the whole of the Bill to-morrow. We cannot possibly break off the consideration of the Bill at this stage, if the result is to be that to-morrow exactly the same situation will arise so that we shall not be able to complete the Committee stage to-morrow. I wish to consult the convenience of all, and personally I should be very glad to stop now, but it would not be possible for us to stop now and then to find that we could not get the rest of the Bill to-morrow. If the right hon. Gentleman who made the first appeal and who said he would like time to look through this Clause, is able to say that the Opposition realise that position, and if it is understood that we shall get the rest of the Bill to-morrow, be it so. But I am afraid that there is not another day available for the Committee stage and that we must either go further to-night or make some arrangement about to-morrow.

12.22 a.m.

Mr. Pethick-Lawrence: I ask the Committee to look at the new Clauses and the Government Amendments on the Order Paper and they will realise how unreasonable is the request of the Government. There are six pages of new Clauses put down by the Government on this Armament Profits Duty. There are other Clauses on which we have a right to some discussion which occupy four or five pages. Then we have three pages of Amendments put down by the Chancellor of the Exchequer to the Schedules and four further pages of proposed new Schedules. The right hon. Gentleman must realise that he cannot expect to drive all that business through between now and Friday morning. If we demand, as any Opposition is entitled to demand, reasonable discussion on each one of these proposals, the right hon. Gentleman could


not possibly get them through. He can only get this Bill in reasonable time, with the consent of the Opposition. As regards any undertaking about the completion of the Committee stage, I must tell him that he will not get it. Here are some 16 pages of the Order Paper each containing four or five Amendments on every one of which we are entitled to have some discussion. It may be that if the Government prove reasonable in regard to the Amendments relating to the Armament Profits Duty, we shall be able to get through the business fairly quickly, but I cannot give any promise, and if the Parliamentary Secretary to the Treasury cannot meet us, and if he insists on completing this Clause to-night, I am afraid he will find that it will take a very considerable time even to get the Second Reading of the Clause.

12.24 a.m.

Mr. Garro Jones: This is not an appeal by an Opposition which is fighting every Clause of the Bill to the last word. We are only asking that these proposals should have reasonable exposition and discussion. To-night, important proposals have gone through with the most cursory explanation. I submit that the issue which we are now discussing is the issue of whether or not the House of Commons is to justify itself by reasonable discussion. If the country realised that we were going to pass this vast and complicated proposal with the ridiculous amount of discussion which is being offered by the right hon. Gentleman, it would bring the House of Commons into great disrepute, I would say to the Patronage Secretary that even if this does involve some difficulty in getting the Bill through, this particular business is not of such vast importance as to bring the whole procedure and reputation of the House of Commons into disrepute. I therefore ask him to hazard the result of to-morrow's progress in an endeavour to maintain the decency of discussion which we ought to maintain, and to say that he will be prepared, if he gets the Second Reading of the Clause, to defer until tomorrow the pressure which he seeks to bring upon us to-night.

12.26 a.m.

The Parliamentary Secretary to the Treasury (Captain Margesson): I have only this to say, that when the Prime

Minister announced last Thursday the business for this week he did say that the Committee stage of the Bill would be concluded on Thursday night. The Amendment Paper on the Finance Bill was then before the House, the White Paper had been issued on the new Clauses, and so the House knew what was being expected of it, and no protest was made at that time about the conclusion of the Committee stage on Thursday night. At Question Time to-day no inquiry was made of the Government as to how far we were going to-night. The suspension of the Eleven o'Clock Rule was moved it is true, for a limited purpose, in order to get the Financial Resolution on Cotton the Committee stage of the Finance Bill being exempted business but if a question on business had been put to the Prime Minister the answer would have been: "We desire to make good progress with the Committee stage of the Finance Bill and to get to such a point as will ensure the conclusion of the Committee stage by to-morrow."
I think the right hon. Gentleman who is leading the Opposition will realise that as far as one was able to arrange a timetable for the early part of to-day's proceedings, it was adhered to. In fact, until we got to the point where the question was, "That Clause 25 stand part of the Bill" we were 10 minutes in front of the little schedule I had worked out in my own mind for the proceedings. Therefore, by no stretch of the imagination can it be said that any time was wasted there. I had thought that it would be possible to make good progress with the A. P. D. Clauses in Committee this evening, and I should still have hoped that with a little more time spent upon them we should be able to dispose of the Clauses under consideration. The right hon. Gentleman has been here long enough to realise that on the Committee stage of the Finance Bill it is not unusual to sit a little bit late, and it is now only half-past 12. Further, I would remind the Committee that last night an appeal was made that we should stop in good time and that I at once acceded to it, "made no bones about it," and we rose about midnight. I wonder, therefore, whether it would not be possible for the right hon. Gentleman to reconsider what he has said and to agree that we should dispose of these new Clauses. If that


could be done, I really think it would give us a good start for to-morrow.

Mr. Pethick-Lawrence: The right hon. and gallant Gentleman is asking us to give him the whole of these Clauses, which have all these Amendments down to them, and deal with matters of great importance. I cannot possibly agree to give him the whole of these Clauses.

12.29 a.m.

Mr. McEntee: What the Patronage Secretary has said is true as far as it goes, but we were not aware that there were to be so many pages of new Clauses as the Government have put down. If we were to take all the new Clauses now there would be little opportunity for the Ministers concerned to do more than give us a short explanation of them, and any possibility of discussion by the Committee generally would be cut out. It appears to me to be utterly unreasonable to take that attitude. It is easy for the Parliamentary Secretary to the Treasury to say that a little further time will enable the House to get on, but I put it to him that it is not so easy for some as it may be for him. It is perfectly easy for those who can afford it to get home in their cars, driven by their chauffeurs, but it is not possible for some of us to get home if we are kept here to the unreasonable hours that we must expect. We might just as well wait until the trains are running to-morrow morning, which is the only time some of us can get home at all.

12.31 a.m.

Sir J. Simon: It is a pity that we should have to throw out the whole programme, which is discussed, as hon. Members opposite know, so constantly with those who speak for them on the other side, but it seems to me that if the right hon. Gentleman says that he thinks it would be asking too much to go beyond giving us the Second Reading of this Clause I think we had better say that that will do to-night. I am sorry about it, because I agree that we are all trying to it in what is really a lot of work in the time which is available. There are very good reasons why we should try to save time in the general interest. It will undoubtedly mean that we shall have a late sitting to-morrow. We cannot help that, but rather than go on arguing about it to-night it would be better to concede the point. I hope everybody will get a good night and come back to-morrow prepared to sit it out.

Mr. Pethick-Lawrence: I thank the right hon. Gentleman. I think he has taken a good House of Commons course and a course which will facilitate the passage of the Bill. I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.

Question again proposed, "That the Clause be read a Second time."

12.33 a.m.

Mr. Pethick-Lawrence: I think that on the Second Reading of this Clause there is not a great deal which need be said. Points will arise to be discussed on the Amendments, and I would refer to only one subject which we cannot move to amend because of the Financial Resolution, and that is the matter of the 200,000. I quite realise that for administrative purposes it is of great importance not to bring in a large number of small people, but, be that as it may, I think the figure of 200,000 is far too high. I have been interested to see that in the Press of those who support the Government and the Press which supports the Opposition that view is upheld. In nearly all the papers I have read the figure of 200,000 is regarded as too high, and it is suggested that there would be nothing undesirable if the figure were 100,000 or even 50,000. The Government, in keeping the figure as high as 200,000, are keeping it far above what it ought to be. I hope that perhaps after a year the Government will be able to cut it down to a much lower figure.

Clause read a Second time.

Ordered, "That the Chairman do report Progress, and ask leave to sit again."[Captain Margesson.]

Committee report Progress; to sit again To-morrow.

Orders of the Day — COTTON INDUSTRY (REORGANISATION) [Money] (No. 2).

Considered in Committee.

[Colonel CLIFTON BROWN in the Chair.]

12.35 a.m

The President of the Board of Trade (Mr. Oliver Stanley): I beg to move:
That, for the purposes of any Act of the present Session to make provision for the better organisation of the cotton industry and cer-


tain industries related thereto, and for purposes connected with the matter aforesaid, it is expedient to authorize—
(a) the payment out of the Consolidated Fund or moneys provided by Parliament of the sums required for the making of any payment under the Cotton Spinning Industry Act, 1936, by the Board of Trade to the board constituted under that Act (hereinafter referred to as the Spindles Board '), being a payment the liability for which is attributable to any provision made by the said Act of the present Session for extending the period during which the powers conferred on the Spindles Board by Sub-section (1) of Section two, and Sub-section (1) of Section four, of the said Act of 1936 are exercisable, for reducing the rate at which the levy under the last-mentioned Act is payable for any year, and for deferring payment of any instalment of that levy; and
(b) the payment into the Exchequer of any sums received under the said Act of 1936 by the Board of Trade from the Spindles Board, being sums the receipt of which is attributable to any provision made, by the said Act of the present Session for extending the said period."—(King's Recommendation signified.)
I do not think this Resolution needs very much explanation. It is really a preliminary to a new Clause I have already put on the Paper which will be moved during the Report stage of the Cotton Industry Bill. It is intended by

that Clause that opportunity shall be given, if the spinning section of the industry so desires and if they show that desire by ballot, that the provision of the Spindles Act, which otherwise expires this autumn, should be renewed for a period of two years. The Financial Resolution is necessary, although, as a matter off act the amount which the Government may guarantee will not be increased because the period over which that guarantee can be given will be extended. For that reason it will be impossible for the House to discuss the new Clause which I intend to move unless we have power in this Financial Resolution.

Resolution to be reported To-morrow.

The remaining Orders were read, and postponed.

It being after Half-past Eleven of the Clock upon Wednesday evening, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at Twenty-two Minutes before One o'Clock